Foreign Outflows Likely To Continue — Macquarie's Aditya Suresh Explains Why

Foreign investors are pulling back from Indian equities, with October and November witnessing meaningful selling, according to Aditya Suresh, managing director and head of equity research, India, at Macquarie Capital.

The sell-off comes as expectations from Indian markets remain high, while valuations hover near a two-year forward P/E multiple of 20 times.

Suresh attributed the outflows to three key factors: high expectations, stretched valuations, and slowing momentum in corporate earnings. "On return and equity, the premium India is seeing in aggregate isn't dissimilar from history," he noted in conversation with NDTV Profit.

"Nifty's returns for the full year of 2024 is going to depend on domestic liquidity, rather than foreign flows," he stated. He expects further sell-off in the quarters to come.

While Indian markets have traditionally commanded a premium due to their growth potential, the broader macro environment—marked by geopolitical uncertainties and controlled commodity prices—appears to be weighing on sentiment. Brent crude's surprising stability at around $75 per barrel, despite global unrest, is a case in point, said Suresh.

He emphasised on the importance of adopting a selective, bottom-up approach in the current environment. "We're well past the phase of chasing a theme or headline. For the next couple of quarters, moderation in broader market performance seems likely," he said.