EU investors eye fresh investments in Indian equities, says Macquarie

Investors from the European Union (EU) nations are looking to make fresh investments in domestic equities by cutting their underweight position, according to financial giant Macquarie.

 

The analysts said in a note that EU investors closely monitor mutual fund (MF) inflows to gauge domestic investor sentiment.

 

“Across our meetings with 30 EU investors last week, we clearly felt, at the margin, post the recent correction in Indian markets (Nifty down about 15 per cent from the peak levels in September 2024), investors are looking to deploy money into Indian markets. While most of them did not want to go to an overweight position, they were thinking of cutting their current underweight stance,” strategists Suresh Ganapathy and Punit Bahlani wrote.

 

European nations are among the leading destinations for foreign portfolio investors (FPIs) in India. Luxembourg, Ireland, the United Kingdom, Norway, and the Netherlands are among the top 10 FPI jurisdictions.

 

FPIs have pulled out over $15 billion from domestic equities so far in 2025. The selloff has been attributed to India’s earnings and economic growth slowdown, expensive valuation, and rising attractiveness of Chinese equities.

 

“Many believe India is a structural story and China has structural issues and at best a tactical short-term play. Few investors believe China is a structural re-rating story from current levels and believe President Xi Jinping will use the stock markets as a tool to drive wealth effect and consequently revive consumption,” said Macquarie’s analysts.

 

“Investors were worried how domestic liquidity could get impacted post the recent correction and were keenly tracking the monthly SIP (systematic investment plans) inflows and overall mutual fund inflows. Any dip in inflows could be the biggest risk derailing the recovery in Indian markets as per them,” the note added.

 

In February, the benchmark Nifty 50 fell nearly 6 per cent, while the Nifty Midcap 100 and Nifty Smallcap 100 indices declined 11 per cent and 13 per cent, respectively. The data on inflows into domestic mutual funds for February will be made public on Wednesday.