Morgan Stanley’s India MD Ridham Desai maintains a positive stance on Indian equities, noting that the economy's structural growth provides a buffer against recent record selling by foreign investors. While external capital remains vital due to India's investment-savings gap, consistent domestic flows via SIPs continue to support the market's long-term health despite ongoing volatility.
Despite heavy selling by foreign institutional investors (FIIs) in recent months, market experts believe the long-term structural story for Indian equities remains intact. Morgan Stanley India Managing Director Ridham Desai recently highlighted that while foreign sentiment has hit historic lows, India’s economic structure offers a level of resilience that many other emerging markets currently lack. This divergence helps explain why domestic investors, supported by regular flows into systematic investment plans (SIPs), have helped absorb much of the selling pressure seen in recent market sessions.
Market watchers often compare India to other emerging economies, such as South Korea, Brazil, and China, to understand current price corrections. For instance, South Korea saw a major surge in earnings driven by artificial intelligence-related capital spending, followed by a sharp 35% market correction and massive foreign liquidation. In contrast, the Indian market is benefiting from a more diversified growth profile that global fund managers are finding increasingly difficult to overlook, even as they trim their allocations to emerging markets to adjust their global risk portfolios.
However, this does not mean the Indian market is immune to external pressures. A key detail often discussed by economists is the difference between how much India invests and how much it saves. The country currently runs an investment rate of about 31.5%, while its domestic savings rate hovers between 28% and 30%. Because the country spends more on growth than it generates in internal savings, it relies on foreign capital to bridge that gap. This structural reality means that while domestic investors are playing a crucial role in stabilising the market, the continued inflow of foreign money remains essential for sustaining the nation's broader growth trajectory.
Prashant Jain, founder and Chief Investment Officer of 3P Investment Managers, points out that the recent market performance is a reflection of internal health rather than just global sentiment. He notes that the market's correction over the last two years should be viewed as a necessary consolidation, particularly after a period where Indian stocks traded at higher valuations compared to their global peers. According to this view, the recent volatility is not a sign of fundamental weakness, but rather a rebalancing of price premiums.
For investors, the key monitorable remains the balance between foreign liquidity and domestic buying. While domestic SIP flows have proven consistent, the market's ability to withstand further foreign outflows will depend on whether domestic appetite continues to grow or stabilises. Investors should keep an eye on how these capital flows evolve over the coming quarters, as they will likely influence short-term market movements more than any single sector-specific event.