Hey there!

It’s Sparsh here!👋 

Nithin Kamath of Zerodha posted a thread that quietly said what a lot of people in Indian finance already know but rarely say out loud. Foreign portfolio investors are losing interest in India. Not slowly. Quite quickly. ⚠️

The reasons stack up in a way that should concern every founder, investor, and operator with exposure to Indian markets. Here is what is actually going on. 🎯

Let’s dive in to know more.🚀

📉 The Mood Has Shifted

Not long ago, India was the emerging market story everyone wanted a piece of. That narrative has cooled considerably. 📊

According to conversations within the industry, foreign investor sentiment has moved from cautious optimism to active disengagement. 📉 

Investors who were sitting on gains have taken money off the table. And they are not rotating into India. They are rotating into Japan, Taiwan, South Korea, and Europe instead. 🌏

🧾 The Tax Structure Nobody Fixed

Markets like Japan and Korea that are currently seeing inflows have leaner, more investor-friendly tax structures. India is competing for the same capital and losing on this dimension purely by policy choice. 🏦

💡 What Actually Needs to Happen

Kamath's point is direct. Fixing the LTCG and STCG structure, and reconsidering the STT hike, is low-hanging fruit. These are policy levers, not structural problems. They can be changed faster than building AI unicorns or managing oil import dependency. 🔧

For India to bring FPIs back, it needs to stop making the tax argument easy for competing markets to win. Every basis point of unnecessary friction is capital that goes to Tokyo or Seoul instead of Mumbai. 📍

🎯 What This Means for You

If you are an Indian founder raising from foreign VCs, this context matters. The appetite at the LP level is thinner than it was two years ago, which filters down into how aggressively global funds deploy into Indian startups. 🌐

If you are an investor with India exposure, watch the FPI flow data closely over the next two quarters. A sustained outflow trend with no policy response would be a meaningful signal about medium-term market direction. 📈

The interest is not gone permanently. But it will not return on its own. 💬