Foreign institutional investors are pulling back from Indian financial markets as rising US Treasury yields exacerbate existing valuation concerns.
The retreat is broad-based, affecting not only equities but also the domestic debt market, signaling a wider risk-off posture among global capital allocators.
The pressure stems from a sharp selloff in global bond markets, where US Treasury yields climbed on Monday amid fears of resurgent inflationary pressures.
This repricing challenges the long-held perception of Treasuries as a stable haven, forcing investors to reassess risk premiums in emerging markets.
As benchmark yields rise, the cost of capital increases, making high-valuation markets like India less attractive relative to safer, higher-yielding alternatives.
India’s market has already been weighed down by subdued corporate earnings growth in the 2025-26 fiscal year and a lack of AI-led growth drivers.