Ease Of Liquidity Weakening Domestic Equity Indices: Nirmala Sitharaman
The finance minister also said that the recent weakness in India's stock market is partly linked to the ease with which investors can sell their holdings, while asserting that the economy's underlying fundamentals remain sound. India’s benchmark stock indexes have fallen nearly 12 per cent since January due to trade-related uncertainty and geopolitical disruptions
New Delhi: With domestic equity indices like Nifty and Sensex failing to give positive returns in the last 2 years, Union finance minister Nirmala Sitharaman has argued that the liquidity paradox that supports trading is also allowing investors to exit quickly. “Because of the ease of liquidity, ease of availability, people are even exiting easily” from equities, Sitharaman said in an interview on the sidelines of the IMF-World Bank meetings in Bangkok.
The finance minister also said that the recent weakness in India's stock market is partly linked to the ease with which investors can sell their holdings, while asserting that the economy's underlying fundamentals remain sound. India’s benchmark stock indexes have fallen nearly 12 per cent since January due to trade-related uncertainty and geopolitical disruptions.
However, Sitharaman identified sustained capital outflows as one of the biggest risks facing the country in 2027. The markets have delivered zero returns in the last two years. Foreign portfolio investors have sold Indian equities worth more than $33 billion so far this year, according to NSDL data.
India has increasingly been viewed as a market left out of the artificial intelligence investment boom, while countries such as Taiwan and South Korea, home to major AI-related companies, have attracted substantial foreign investment. “The flight of capital toward AI and the US, which otherwise moves toward different countries for different sectoral investments, is a concern,” Sitharaman said.
However, the finance minister indicated that India could be relatively resilient to a broader market correction triggered by a potential reversal in the AI boom, given its comparatively limited exposure to the rally in AI-related assets. India is “no longer a laggard” in frontier technologies, and investments are being made to establish domestic semiconductor manufacturing capabilities.
Sitharaman’s remarks come amid a global shift in investment towards artificial intelligence (AI) and markets with a strong presence in the semiconductor industry. In the interview, she said India had not received the same scale of AI-related investments as some other jurisdictions, but maintained that the country was making progress in frontier technologies.
Meanwhile, she also said that India was also focusing on semiconductors used in everyday applications, including refrigerators, cars and connected household devices. This approach seeks to build capabilities across different parts of the semiconductor value chain rather than focus exclusively on the most technologically advanced segments.