MUMBAI: Stock markets are expected to open weak on Monday following the massive sell-off on Wall Street on Friday evening. US stocks, particularly those linked to the AI ecosystem, faced a huge sell-off, leading to a 1.5% decline in the Gift Nifty index, a proxy for the Indian market in late trades. The Nasdaq closed 4.2% lower, the S&P 500 ended 2.6% down, and the Dow Jones was down 1.4% at close.
Analysts Expect Follow-Up Selling
Brokers and analysts on Dalal Street are expecting follow-up selling in the domestic market on Monday. Traders anticipate Indian stocks to remain under pressure, primarily due to selling by foreign funds as they assess the impact of Friday's sell-off in the US markets.
Potential Shift in Foreign Fund Strategy
Conversely, a small group of market participants believes that since foreign funds have been selling Indian stocks for the last several months, mainly due to the AI-led rally in global markets where India lagged, Friday's sell-off might prompt foreign funds to reconsider India as an investment destination. The added booster could be the series of steps announced by the government and the Reserve Bank of India (RBI) on Friday.
According to VK Vijayakumar of Geojit Investments, for foreign portfolio investors (FPIs) to invest in India, the AI trade—the principal driver of FPI outflows from India—must change. There are early signs of this happening, as the Nasdaq crash of about 5% on June 5 indicates that the AI bubble may burst.
FPI Outflow Data
So far in June, FPIs have net sold stocks worth nearly Rs 43,000 crore, surpassing May's figure of almost Rs 33,000 crore. In 2026 so far, net outflow from stocks is nearing Rs 3 lakh crore, setting a new yearly record.
