Why Foreign Investors Are Leaving India: Ajit Dayal Blames How India Treats Their Money More Than the AI Trade
Published: October 26, 2026
Ajit Dayal, who has brought foreign investors into India since 1990, blames their exit more on how India treats their money than on the AI trade. His words are blunt, and his frustration is palpable.
The flows show how far it has gone. Foreign investors have taken back almost all the money they put into Indian stocks since 2015, most of it since October 2024, and their share of NSE-listed companies is the lowest in 69 quarters.
AI is part of the story. Global money is chasing the AI trade, and the IMF says markets are already worried about what AI means for India's software and back-office work. Dayal points to the rest: capital gains tax on pension funds that pay no tax at home, rules that keep changing, a policy of pushing the rupee down to help exports, which he calls a tax on foreign capital, and the "grease of doing business".
On the other side, domestic institutions are buying more than foreign investors sell, and BlackRock said today that it is still overweight on India and expects foreign money to return.
Dayal's piece is an opinion column in the Financial Express, 26 Oct. He made the same case on The Core's podcast two days earlier.
Financial Express: financialexpress.com/business/economy-explained/never-seen-such-dismay-why-a-36-year-market-veteran-is-warning-india/4369099/
The Core podcast: thecore.in/podcasts/the-core-report/ajit-dayal-why-foreign-investors-are-selling-indian-markets-governance-tax-rupee-872915
My earlier analysis on this
Could this time be different? 24 Oct. Past drawdowns, AI valuations and cracks across markets and the economy: tigzig.com/post/drawdowns-this-time-different-oct2026
A crescendo of warnings on AI debt and returns, 23 Oct. S&P Global, Gartner, Morgan Stanley, the IMF and the World Bank: tigzig.com/post/ai-warnings-crescendo-oct2026
Foreign portfolio money is leaving Indian stocks, 19 Oct. The flows, the sectors and who is buying instead: tigzig.com/post/fpi-foreign-money-leaving-india-oct2026
Bond markets have started acting, 25 Sep. Long-term yields at highs while the Fed cuts: tigzig.com/post/bond-market-rout-sep2026
India's next tech wave: AI data centres, 24 May. Adani, Reliance, Airtel and L&T are building them: tigzig.com/post/india-next-tech-wave-ai-data-centers-may2026
Notes on the data
The GIFT City example is about the cost of managing funds from GIFT City. One of the two funds moving to Abu Dhabi invests in US shares, the other is an arbitrage fund. It is separate from FPI flows into Indian stocks.
Flows are NSDL's equity figures in US dollars, to 23 Oct. On NSDL data, which includes primary-market buying, foreign selling paused last week, with about US$0.4 billion of net buying from 19 to 23 Oct. NSE's provisional exchange data for the same days shows net selling.
Ownership is NSE's Market Pulse, June 2026 quarter, the latest. The Nifty in dollars is NSE's own Nifty50 USD index.
One door that is opening: AI data centres in India. I covered this in May and am updating it soon.
Why foreign investors are leaving India
Browse the slides or download the PDF
Full Deck Content (Text Format)
Text below was extracted from the source deck. Chart visuals stay in the PDF and as slide images above the post.
Slide 1
India Macro Analysis · 26 October 2026
"In 36 years of interaction with FPIs, we have never seen such dismay and irritation with India."
Ajit Dayal, who founded Quantum Advisors in 1990
Ten years of foreign buying, nearly all gone.
"It is not due to the AI we read about but due to the other AI we don't write about: Arrogant India." Ajit Dayal
Net foreign money in Running total since 2015, US$ billion
To 23 Oct 2026 0 25 50 75 2015 2020 2025 67.2 Sep 2024 3.5
Who owns NSE-listed firms % of market value, to June 2026
Domestic institutions Foreign portfolio investors 0 10 20 FY01 FY11 FY21 15.1 19.5
SourcesNSDL monthly, daily and sector FPI reports, equity, US$. NSE Market Pulse Aug 2026. Ajit Dayal, Financial Express, 26 Oct 2026.
Amar Harolikar, ACA · Decision Sciences & Applied AI1 of 4tigzig.com
Slide 2
Why
AI is one reason. Dayal says the bigger one is how foreign money is treated
"Currently, the passion for the 'AI' trade is a significant factor in deciding allocations from providers of capital." Ajit Dayal
NSE also cites the West Asia conflict, the rupee, US yields and rich valuations.
S&P 500 and Nifty 50 100 = 26 Sep 2024, Nifty's dollar peak 70 100 130 160 Sep 2024 Oct 2026 S&P 500 Nifty 50 in US$ Nifty 50 in rupees -14% +33% -24%
Rupees per US dollar The rupee has lost 11.6% since Sep 2024 84 88 92 96 Sep 2024 Oct 2026 83.7 94.7
"The second channel, some of which we are already seeing, is market concerns that AI could have negative implications in the previous part of technology, software, for example, back office operations, logistics, where India has been particularly strong." Athanasios Vamvakidis, IMFHe adds that the IMF does not yet see this in real-economy data.
Pushing the rupee down to help exports is, Dayal writes, "a tax on the total capital that an FPI or FDI invests" in India.
SourcesNSE Nifty50 USD index; Yahoo Finance via TREMOR (S&P 500, Nifty 50, USD/INR), to 23 Oct 2026. IMF: Business Today. Dayal: Financial Express. NSE Market Pulse Aug 2026.
Amar Harolikar · Decision Sciences & Applied AI2 of 4tigzig.com
Slide 3
At home
Tax, rules and what Dayal calls the "grease of doing business"
"Entities such as pension funds and endowments have no tax in their home country and the taxes on capital gains they pay in India cannot be offset by any other tax payment."
He blames "the disrespect for consistency of rules, the tampering of laws".
Many foreign fund leaders are of Indian origin. Settling their deceased parents' estates in India, he writes, they have "been witness to India’s wheels of corruption". That "converts the India story from one of ‘ease of doing business’ to the ‘grease of doing business’".
A related move this month
Artha Bharat, a GIFT City fund manager, is moving two funds (over US$125 million, one in US shares, one an arbitrage fund) to Abu Dhabi. This is an Indian fund manager restructuring its funds, separate from FPI flows into Indian stocks. Its managing partner: "Investors compare jurisdictions on speed of onboarding, ticket size relative to their allocation, and certainty of tax outcome."
SourcesDayal: Financial Express, 26 Oct 2026. Artha Bharat: BusinessLine, 21 Oct 2026.
Amar Harolikar · Decision Sciences & Applied AI3 of 4tigzig.com
Slide 4
The other side
"We're still structurally overweight on India on a strategic horizon." Ben Powell, BlackRock Investment Institute, 26 Oct 2026
BlackRock expects foreign investors back once the US midterms and West Asia tensions pass. On NSDL data they were net buyers in 19 of the 24 years from 2002 to 2025, and each earlier selling year (2008, 2011, 2018, 2022) was followed by net buying. They still hold US$694 billion of Indian shares. Domestic institutions bought US$23.2 billion in the June 2026 quarter, more than the US$15.1 billion foreign investors sold.
Earlier analysis
24 Oct 2026 Could this time be different? Past drawdowns, AI valuations and cracks across markets and the economy.
23 Oct 2026 A crescendo of warnings on AI debt and returns S&P Global, Gartner, Morgan Stanley, the IMF and the World Bank.
19 Oct 2026 Foreign portfolio money is leaving Indian stocks The flows, the sectors and who is buying instead.
25 Sep 2026 Bond markets have started acting Long-term yields at highs while the Fed cuts.
24 May 2026 India's next tech wave: AI data centres Adani, Reliance, Airtel and L&T are building them.
Not investment advice. This is my analysis of public sources, for information only. Care has been taken, but errors are possible. Use of AI. Parts of this work were prepared with AI under my direction. I reviewed, edited and approved every page. The analysis and conclusions are mine.
SourcesBlackRock: CNBC-TV18, 26 Oct 2026. NSDL monthly and sector reports. NSE Market Pulse Aug 2026.
Amar Harolikar · Decision Sciences & Applied AI4 of 4tigzig.com
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