NEW DELHI: India is the world’s fastest-growing major economy. It has nearly $700 billion in foreign exchange reserves, a stable banking system and one of the strongest growth outlooks among large nations.
Yet foreign investors have been pulling money out of Indian stock markets.
Foreign portfolio investors withdrew a net $16.5 billion in FY26, while net foreign direct investment (FDI) stood at just $7.7 billion, far below the levels seen a few years ago.
The question, therefore, is obvious. If India is doing so much right, why isn’t more global capital coming in?
Economists say part of the answer lies in how global investing has changed. While India spent much of the past decade fixing structural weaknesses and improving the ease of doing business, global investors have increasingly moved towards artificial intelligence (AI), semiconductors and advanced manufacturing — sectors that have become the biggest magnets for capital.
Foreign capital is chasing AI
The biggest investment boom in the world today is no longer centred on economic growth alone. Increasingly, foreign capital is flowing towards artificial intelligence, semiconductors and the infrastructure needed to power both.
The biggest winners of this shift are not necessarily the fastest-growing economies. They are the countries and companies sitting at the centre of the AI revolution.
The United States has become the epicentre of the AI boom. Taiwan sits at the heart of the global semiconductor supply chain. South Korea has emerged as a major beneficiary of soaring demand for memory chips used in AI systems.
“Global capital pursues returns, not growth,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
It is a simple observation, but one that helps explain what investors are doing today.
Countries often assume strong GDP growth automatically attracts investment. Investors, however, are not buying economic report cards. They are buying future profits.
According to Vijayakumar, South Korea’s KOSPI has delivered returns of around 110% so far this year and nearly 200 per cent over the past year. Taiwan’s benchmark index has gained roughly 58% this year and around 100% over the last twelve months.
Much of that rally has been concentrated in a handful of companies linked to the AI supply chain
