Veteran investor Shankar Sharma, who founded First Global in 1994 and later ventured into GQuant Investech in 2015, has provided a sharp pushback to popular market narratives about foreign investor behavior. According to reports from The Economic Times, Sharma's central argument is that popular narratives around why foreign investors are avoiding India, be it the lack of AI exposure or tax concerns, do not stand up. His rebuttal is rooted not in opinion, but in comprehensive data analysis that challenges prevailing market commentary.
The data reveals a stark contrast between AI exposure and market performance. As reported by The Economic Times, South Korea's KOSPI Index has delivered a staggering 149.6% one-year return, while Taiwan's TAIEX Index is up 96.6%. Other markets with limited AI ecosystems have posted strong gains, including Vietnam (74%), Brazil (59.1%), Japan (49.9%), and Pakistan (47.7%). In contrast, the US, widely seen as the epicentre of AI, shows the NASDAQ 100 with a 40.3% one-year return and the S&P 500 at 29.4%, placing it well below several non-AI-heavy markets.
India's recent market performance stands in stark contrast to the global AI narrative. According to The Economic Times data, the Nifty 50 has declined 12.1% over one year, while the Sensex is down 14.5%. Even the broader Nifty 500 has fallen 8.2%. However, Sharma points out a critical inconsistency in the prevailing narrative. As reported by The Economic Times, India has never been a tech-heavy market, and yet it delivered strong returns over the past two decades. If tech was not the driver then, it is difficult to argue that its absence is the reason now.
The relationship between foreign investment flows and market performance shows a weak correlation. According to The Economic Times analysis, the correlation between net FII investment and Sensex returns stands at just 0.15 since 1999, indicating a weak relationship. More importantly, the data shows that markets have risen and fallen across periods of both strong inflows and significant outflows. Over the last 10 years, even with cumulative FII outflows of ₹2,93,317 crore, the market has delivered a 226% return.
