MUMBAI: Indian stock markets are set to open weak on Monday as a massive sell-off on Wall Street Friday evening spooks global investors, according to a report by Business Today. The Gift Nifty index, a proxy for late trades in Indian equities, closed 1.5% lower, signalling a negative start for Dalal Street. Brokers and analysts expect follow-up selling in the domestic market as foreign funds reassess their positions amid the US rout.
Market Reaction and Key Indices
The sell-off was broad-based on Wall Street, with technology stocks bearing the brunt. The Nasdaq Composite closed 4.2% lower, the S&P 500 fell 2.6%, and the Dow Jones Industrial Average dropped 1.4%, according to the report. The decline was concentrated in stocks linked to the artificial intelligence ecosystem, which had driven much of the rally in global markets in recent months.
| Index | Decline (%) |
|---|---|
| Nasdaq Composite | 4.2 |
| S&P 500 | 2.6 |
| Dow Jones Industrial Average | 1.4 |
| Gift Nifty (proxy for Indian market) | 1.5 |
FPI Outflows Accelerate
Foreign portfolio investors (FPIs) have been net sellers of Indian equities for several months. The report states that in June so far, FPIs have net sold stocks worth nearly Rs 43,000 crore, eclipsing May’s figure of almost Rs 33,000 crore. For the calendar year 2026, net outflows from equities are nearing Rs 3 lakh crore, a new yearly record.
| Period | Net FPI Outflow (Rs crore) |
|---|---|
| June 2026 (so far) | ~43,000 |
| May 2026 | ~33,000 |
| 2026 year-to-date | ~3,00,000 (record) |
The persistent selling has been attributed to the AI-led rally in developed markets, which diverted foreign capital away from India. However, Friday's sharp decline in US tech stocks may alter that trend.
Analyst Views on AI Bubble and India's Appeal
According to VK Vijayakumar, chief investment strategist at Geojit Investments, the environment for FPI flows into India is contingent on a shift in the global technology trade.
"There are early signs of this happening. The crash in the Nasdaq by about 5% on June 5 is an indication that the AI bubble may burst."
Vijayakumar noted that the AI trade has been the principal driver of FPI outflows from India. If the bubble deflates, foreign funds may reconsider India as an investment destination. The report adds that a small group of market participants believe the sell-off could prompt FPIs to look at India again, especially given the series of steps announced by the government and the Reserve Bank of India (RBI) on Friday to boost the economy.
Outlook for Indian Markets
Traders expect Indian stocks to remain under pressure in the near term, primarily due to continued selling by foreign funds as they gauge the full impact of the US sell-off. The Gift Nifty's 1.5% decline suggests a weak open for the BSE Sensex and NSE Nifty on Monday. The net FPI outflow of nearly Rs 3 lakh crore in 2026 highlights the scale of foreign selling. Whether Friday's reversal in US tech stocks marks a turning point for capital flows into India will depend on the durability of the AI trade and the effectiveness of domestic policy measures.
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