Why FIIs Are Shunning India: Sridhar Sivaram Explains

Foreign institutional investors (FIIs) have largely stayed away from Indian equities this year, despite a strong rally across other emerging markets. Sridhar Sivaram, Investment Director at Enam Holdings, says the combination of high valuations and muted earnings growth has made India less attractive compared to peers.

High Valuations and Muted Earnings Growth

According to Sivaram, the high valuations and muted earnings growth in India have made it less attractive to FIIs compared to other emerging markets. "If you have 7–8% earnings growth and your market PE is 22, while Brazil, China, Korea, and Taiwan offer far better earnings growth at much cheaper valuations, it’s obvious where the money flows," Sivaram explained. He also pointed out that Korea is up 60–70%, China 40%, and Latin America 30–40%, while India has remained flat in dollar terms.

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Impact of FII Outflows on Indian Markets

The continuous FII outflows have put pressure on the Indian markets, with the cumulative outflows for 2025 going above Rs 1.5 lakh crore. In the first week of December alone, foreign investors offloaded equities worth R 11,820 crore. This has led to a cautious sentiment among investors, with many opting to stay away from the Indian markets.

However, Sivaram believes that the Indian markets will see a turnaround in corporate earnings over the next six quarters. "We’ve missed earnings growth for six quarters now, but FY27 could see 15–18% growth on a low base," he said. For more information on corporate earnings, you can visit our website.

Revival in Corporate Earnings

Sivaram expects a revival in corporate earnings over the next six quarters, which could lead to reasonable returns for investors. He believes that earnings remain the single biggest determinant of market performance, and if this revival plays out, investors can expect good returns going forward.

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Bullish Stance on Precious Metals

Sivaram also highlighted his bullish stance on precious metals, noting that he remains long on both gold and silver. He remarked that these assets have delivered strong returns through 2025. For more information on precious metals, you can visit our website.

Conclusion

In conclusion, Sivaram’s views on the Indian markets and FIIs provide valuable insights for investors. While the current underperformance of the Indian markets may be a cause for concern, the expected revival in corporate earnings could lead to reasonable returns for investors. As always, it’s essential to stay informed and up-to-date with the latest news and trends in the stock market to make informed investment decisions.