FII selling isn’t the only reason India has lagged, say market experts

New business data points to the fact that Anish Tawakley, CIO, DSP Mutual Fund pointed out to corporate earnings as an important reason why Indian equities have lagged, rather than attributing the underperformance entirely to foreign investor selling. “Over the last two years, large-cap earnings expansion was muted. So the underperformance cannot be blamed solely on foreign flows,” he stated.

Speaking on the sidelines of Moneycontrol’s Mutual Fund Summit – Delhi edition 2026, during the session ‘Inevitable India, Uncertain World’, Tawakley, Deepak Shenoy, CEO, Capitalmind Mutual Fund, and Sachee Trivedi, Founder & CIO, Trident Capital Investments, discussed the factors behind India’s market performance, the earnings outlook and where market participants could find the next phase of expansion.

Largecap underperformance capped markets upside

Tawakley stated he does not like predicting foreign investor flows and believes the market’s performance needs to be viewed through the lens of earnings as well. “I don't like predicting flows. But over the last two years, large-cap earnings expansion was muted. So I don't think you can blame it only on foreign flows,” Tawakley further noted. At the same time, the earnings outlook over a longer period stays healthy.

“The earnings outlook is healthy over three years. GDP expansion should be healthy in three years. The only thing that will determine is how well we do in building cities and houses,” he stated. Tawakley stated market participants should as a result avoid putting too much weight on short-term market movements.“Equity market participants should take at least a three-year view,” he further noted.

Nifty 50 doesn't capture the full picture of business opportunity, say market watchers

Trivedi stated the opportunity set in Indian equities is additionally changing, with businesses and business models evolving beyond the traditional benchmark universe.

“Businesses are changing, models are changing, if not Nifty 50, it will be Nifty Next 50. So we shouldn't lose faith in resilience,” Trivedi further noted. The performance of the Nifty 50 does not necessarily capture the full opportunity available across Indian businesses. Trivedi suggested market participants to look at what is happening underneath the benchmark rather than assuming that a weak Nifty automatically means there are no opportunities in the broader market.

Shenoy made a similar point, saying the market’s headline performance does not tell the entire story of where businesses and future expansion opportunities may be emerging. “Small caps may become large caps. So don't focus only on the Nifty being flat,” he stated. The next phase of expansion could come from a different set of themes than those that have fuelled markets previously.

“If the economy is growing and there’s new impetus to Capex and manufacturing, this could replace the previous AI and consumer expansion with job creation and future expansion,” he stated. Market participants, as a result, should focus on the businesses that benefit from this shift rather than looking only at the benchmark.