BofA strategists forecast a sustained foreign selloff in Indian stocks through 2027, signaling extended weakness for the Nifty 50 as global funds rotate away from overvalued emerging markets.
BofA's forecast of sustained foreign outflows extends the bearish pressure that has already driven the Nifty 50 lower. The index faces further downside as FIIs are expected to remain net sellers through 2027, driven by high valuations and deteriorating earnings visibility.
The Nifty 50 is likely to face prolonged downside pressure as foreign institutional investors, who have been net sellers, are expected to continue reducing their exposure through 2027, according to BofA.
Domestic institutional and retail investors have been absorbing some selling, but BofA's forecast implies that domestic liquidity may not fully offset the scale of foreign outflows, leading to net downward pressure on the index.
Sustained foreign capital outflows from Indian equities typically increase demand for dollars as investors repatriate funds, weakening the rupee. BofA's outlook for an extended exodus through 2027 implies persistent upward pressure on USD/INR.
When foreign investors sell Indian stocks, they convert the proceeds into dollars, increasing demand for USD and supply of INR, which depreciates the rupee. An extended selloff, as BofA predicts, could keep pressure on the rupee through 2027.
The Reserve Bank of India often intervenes in the forex market to curb excessive volatility, but sustained capital outflows could still lead to orderly depreciation unless the RBI spends reserves aggressively.
Bank of America strategists predict that foreign investors will continue to pull capital from Indian equities, extending the selloff that has already driven the Nifty 50 lower. The bank cites persistent headwinds including elevated valuations, slowing earnings growth, and a stronger dollar. The forecast suggests the exodus could last through 2027, challenging India's growth narrative.
Bank of America strategists predict that foreign institutional investors will continue to reduce their holdings in Indian equities through 2027, extending an ongoing selloff.
Factors include elevated valuations relative to historical averages, decelerating earnings growth, a stronger U.S. dollar, and higher global interest rates that make Indian assets less attractive.
Persistent foreign selling typically puts downward pressure on the rupee, as capital outflows reduce demand for the currency, potentially leading to INR depreciation.