India’s Finance Minister blames easy exits and excess liquidity for equity market's underperformance

Nirmala Sitharaman, India's finance minister, during the International Monetary Fund (IMF) and World Bank annual meetings in Bangkok, Thailand, on Thursday, Oct. 15, 2026.Bloomberg | Bloomberg | Getty ImagesExcess liquidity in India's equity market has contributed to underperformance and may continue to do so, according to Finance Minister Nirmala Sitharaman."Because of the ease of liquidity, ease of availability, people are even exiting easily" from equities, Sitharaman told CNBC in an exclusive interview on the sidelines of the IMF-World Bank meetings in Bangkok on Friday. However, the fundamentals of the Indian economy are "fine," she said.Since January, India's key benchmark indexes have slipped nearly 12%, as per LSEG data, even though the country's economic growth has been resilient amid trade uncertainty and geopolitical shocks. India has been hit with record outflows by foreign investors from its equity markets, and Sitharaman said that continued capital outflows are one of the biggest risks for India in 2027. Still, domestic capital continues to flood the market. Indian equity mutual funds have recorded net inflows every month since March 2021, according to data released b...