India’s growing pool of retail investors may have transformed the country’s capital markets, but rising foreign ownership of Indian equities continues to pose a structural risk to the economy and the rupee, according to Raamdeo Agrawal, Chairman of Motilal Oswal Financial Services.
“So, as a country, we will be working only to service FI holding by way of dividend and by way of exit. And, you know, this kind of time, when we have lot of geopolitical concern, their exits become, that pressurises the rupee,” said Motilal Oswal Financial Services Chairman Raamdeo Agrawal.
His remarks come as foreign portfolio investors (FPIs) have sold a combined Rs 4.42 lakh crore worth of Indian equities across 2025 and the first five months of 2026, underscoring the continued influence of overseas capital on domestic markets.
Agrawal argued that while India’s equity markets have delivered substantial wealth creation for both domestic and foreign investors, the growing value of foreign holdings could become a long-term concern. As overseas investors accumulate larger stakes in Indian companies, future dividend payments and capital outflows could increasingly place pressure on the country’s external balances.
The concern comes against the backdrop of sustained foreign selling. According to National Securities Depository Limited (NSDL) data, FPIs were net sellers of Rs 1,66,286 crore in 2025 and have withdrawn another Rs 2,76,178 crore during the first five months of 2026. The continued outflows have coincided with a decline in India’s weight within major global indices and increasing volatility in foreign capital flows.
Agrawal noted that foreign investors have benefited enormously from India’s long-term market expansion, with the value of their holdings rising several-fold over the past two decades despite periodic bouts of selling.
“Their 200, 250 billion dollar holding has become now 850, 900 billion. So, whatever they sell, their holding actually keeps growing,” he said.
Retail Investors Step Up
While highlighting the risks posed by foreign ownership, Agrawal also credited domestic investors with fundamentally reshaping India’s financial landscape. He said the widespread adoption of digital financial infrastructure and investment platforms has triggered an unprecedented democratisation of capital markets.
“We actually got political independence in 47, of course. But we actually got financial independence in 2020. Because that’s when my retail, thanks to digital infrastructure, they started coming 3 million customers per month. My Demat accounts have gone from 40 million to 240 million,” Agrawal said.
The numbers reflect the scale of the transformation. India now has more than 18 crore demat accounts, while systematic investment plans (SIPs) continue to channel record household savings into mutual funds. Domestic institutional investors have repeatedly absorbed foreign selling pressure, helping Indian markets remain resilient through periods of global uncertainty.
Growth-Currency Disconnect
Agrawal also pointed to what he described as a growing disconnect between India’s economic performance and the behaviour of its currency. Despite remaining one of the world’s fastest-growing major economies, India has witnessed persistent pressure on the rupee amid global uncertainty, foreign outflows and shifting capital allocations.
“I am the fastest growing economy in the world. I am worst performing currency. My allocation in the emerging market, MSCI, has gone down from 21 per cent to 11 per cent. My all country allocation, MSCI, has come down from 2.5 per cent to 1.35 per cent,” he said.
Market participants note that sustained foreign selling can create a self-reinforcing cycle. A weaker rupee reduces India’s dollar-denominated market capitalisation, which in turn affects index weightages and can trigger additional passive outflows from global funds tracking benchmark indices.
Wealth In Rupees
Despite his concerns about the rupee, Agrawal remained optimistic about India’s long-term growth prospects. He argued that rising equity ownership, expanding credit growth and increasing household wealth are creating a powerful wealth effect that is supporting consumption and economic activity.
“The wealth effect of the stock market is pushing the economy much faster. So, I don’t have any doubts. In rupee terms, we will do exceedingly well. I have seen 45 years as the capital market. Next 45 will be even more exciting,” he said.
However, he cautioned investors against viewing wealth creation solely through the lens of local currency gains. According to him, geopolitical developments and currency depreciation could influence how Indian wealth is perceived in global terms.
“You will feel very rich in terms of rupee, the local currency. But I only hope there is no more this kind of geopolitical convergence of risks from all sides. Otherwise, in dollar terms, you may not feel so rich,” Agrawal said.
Services Remain Key Strength
On the broader economy, Agrawal said India possesses sufficient domestic savings to finance future growth and is no longer constrained by capital availability. Instead, he believes technology, innovation and managerial expertise will determine the pace of India’s next phase of economic expansion.
“There is no dearth of capital per se. Technology might be in short supply. But per se, there is no dearth of domestic savings to fuel the factories,” he said.
Agrawal also identified services exports as India’s most enduring competitive advantage. While manufacturing remains a strategic priority, he argued that India’s services sector continues to generate significantly higher value addition and remains well positioned to benefit from currency trends.
“In effect, we are a service powerhouse and at 95 to 100 rupees to a dollar, I don’t think anybody can come close to Indian services,” he said
