Why are FPIs selling if India’s growth story remains strong? Citi's Sue Lee explains

Foreign portfolio investors (FPIs) may be selling Indian stocks, but that does not necessarily mean they have turned negative on India's long-term growth story, according to Sue Lee, Head-Markets Asia South at Citi.

Speaking at the Citi India Conference 2026, Lee said global investors continue to believe in India's medium- to long-term growth potential. However, two powerful global themes are currently drawing capital away from India and into other markets.

The first is rising geopolitical uncertainty. The conflict in West Asia has increased concerns around inflation, oil prices, currencies and bond markets. Investors globally have become more cautious as they assess the impact of these developments on economic growth and financial markets.

The second is the artificial intelligence (AI) investment boom. Massive spending on AI infrastructure and technology is attracting global capital into a narrow group of companies and markets that are seen as direct beneficiaries of the trend.

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According to Lee, these factors are affecting India even though domestic fundamentals remain strong. "The long-term growth trajectory, which is intact, that's really become a back-ended narrative," she said.

She noted that Indian market valuations have corrected and the rupee has weakened, but that alone may not be enough to bring back large foreign inflows. Investors are looking for fresh catalysts that can put India back in focus.

One potential trigger could be the country's initial public offering (IPO) pipeline. Lee said several upcoming public issues have generated interest among global investors. If these IPOs are priced attractively, they could help draw foreign money back into Indian markets.

Also Read | Foreign investors still backing quality Indian IPOs: Citi

She also argued that lower net foreign direct investment (FDI) should not automatically be viewed as a negative sign. Some of the decline reflects successful exits by investors who have earned strong returns in India, while Indian companies are increasingly investing overseas. Both trends, she said, are characteristics of a more mature economy.

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Despite the recent outflows, Lee remains positive on India's investment outlook. She highlighted continued investments in areas such as iPhone manufacturing, AI data centres, and global capability centres (GCCs), adding that there remains strong international interest in the country.

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Summing up the sentiment among foreign investors, Lee said there is "no argument against the mid to long-term growth potential in India." For now, global capital is being pulled by broader macro and AI-related themes, but India's long-term growth story remains intact.

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