Korde Challenges Valuation Premises Amid FII Outflows
Rohan Korde, fund manager at Baroda BNP Paribas Mutual Fund, stated that record systematic investment plan (SIP) inflows cannot substitute for corporate earnings growth in Indian equities. He emphasized that sustained double-digit corporate earnings growth is essential to justify India's valuation premium over other emerging markets.
Korde’s comments come as Indian equities face a combination of record foreign investor outflows, elevated crude oil prices, rising bond yields, and intensifying global competition for capital. While domestic investors continue to pour money into mutual funds, foreign institutional investors (FIIs) have accelerated their selling activity.
According to reported data, FII outflows accelerated from Rs 1 trillion in 2024 to Rs 1.3 trillion in 2025 and reached nearly Rs 3.5 trillion year-to-date in 2026. This shift has coincided with a reduction in India’s weight in the MSCI Emerging Markets Index, which decreased to 10.7 percent in September 2026 from 11.3 percent in August 2026 and 15.2 percent in September 2025.
Drivers of Foreign Investor Selling
Korde attributed the FII outflows to several specific factors, including allocation to primary markets, sharp rupee depreciation versus the US dollar, decreased MSCI Emerging Markets Index weight, and a perceived lack of artificial intelligence (AI) plays in India.
Despite the heavy selling pressure, Korde argued that FII selling is more cyclical than structural. He noted intermittent FII inflows in July and August 2026 and highlighted net primary market inflows of Rs 85,500 crore over the last 12 months.
The fund manager pointed to geopolitical challenges impacting corporate profitability as another headwind. He also noted that India faces competition from South Korea and Taiwan regarding AI and semiconductor themes, which has influenced global capital allocation decisions away from Indian tech-related sectors.
Divergence Between Domestic Flows and Global Sentiment
While foreign investors have withdrawn capital, domestic flows have been directed toward sectors reporting strong earnings growth. Korde identified defense, new-age platform companies, healthcare, autos, and capital goods/industrials as key areas benefiting from this trend.
Korde stated that while demand and consumption remain resilient in India, the broader market requires fundamental earnings justification to maintain its premium status. He noted that global institutions and central banks have upgraded India's GDP growth forecast for FY27, with GDP growing at 7.6 to 8.2 percent over the past four to five quarters.
The disparity between robust domestic liquidity and significant foreign outflows highlights a shifting dynamic in Indian equity markets. Korde’s assessment suggests that without corresponding corporate earnings expansion, the current valuation levels may not be sustainable solely on the back of domestic SIP inflows.