India's Finance Minister Warns of 2027 Risk as Stocks Slide Over 12%

India’s finance minister, Nirmala Sitharaman, has put the spotlight on one of the biggest dangers for India in 2027. Her remarks coincided with Indian benchmark equity indexes sliding more than 12% this year.

Since the start of 2026, the NSE Nifty 50 has lost 12.13%, and the BSE SENSEX has declined 12.78%. Some of that weakness, Sitharaman said, traces to abundant liquidity in the marketplace.

Foreign Cash Leaves While Domestic Funds Buy

Sitharaman delivered her comments to CNBC during the IMF-World Bank meetings in Bangkok. Continued capital outflows, she said, count among the biggest dangers India faces in 2027.

Overseas portfolio investors have sold upward of $33 billion of Indian equities so far this year, NSDL data show. Sales restarted in September after a short break.

Foreign institutional investors pulled $4.1 billion from the market that month, erasing the $2.4 billion of inflows seen in August, HSBC Mutual Fund noted. India's economic fundamentals continue to be healthy, Sitharaman added.

“Because of the ease of liquidity, ease of availability, people are even exiting easily,” Sitharaman stated.

Domestic institutions, however, headed in the opposite direction. Their equity purchases in that month reached $8.1 billion. Every month since March 2021, equity mutual funds have also recorded fresh net inflows.

Those consistent purchases may have let current investors find a way out. Initial public offerings in India between 2021 and 2025 raised $60.4 billion, EY data show. Shareholders selling in those IPOs collected $37.7 billion, equivalent to 63% of the total. A record amount of nearly $10 billion in equity deals was priced in India in August.

India's weight in regional benchmarks has also declined. Goldman Sachs estimates India's share in the MSCI Asia Pacific ex-Japan benchmark at 10%, versus 19% a few years earlier. Taiwan and Korea, home to leading AI companies, represent 29% and 22% of the index.

Sitharaman described the movement of capital into AI and the US as a worry. Even so, she said India would not be harmed if the AI bubble were to burst, because it never attracted that kind of investment.

The Rupee Comes Under Pressure as RBI Draws Down Its Cushion

The rupee is under pressure from the outflows, high oil prices and climbing US Treasury yields. This strain has pushed the Reserve Bank of India (RBI) into more active intervention.

According to Reuters, the central bank has spent roughly half of the more than $140 billion it had raised. Spot dollar sales and swaps since June 8, three economists estimate, have totaled $75 billion to $80 billion.

By October 2, reserves had slipped to $734.6 billion, roughly $51 billion beneath their early-September peak. The decline was highlighted by brokerage Ambit in a note.

“The sharp fall in usable reserves, after adjusting for forward shorts and gold, has reached noticeable levels. A continued fall could raise doubts about the RBI’s ability to defend the rupee and fuel more speculation.”

Ambit went on to say that the RBI has intervened each time the rupee approached 97 against the dollar during the past six months.

Corporate earnings, in HSBC Mutual Fund's view, will determine near-term returns. The fund observed the Nifty 50 changing hands at 17 times one-year forward earnings, roughly 13% under its five-year average.