There is very little relation between how an economy is performing and how its stock market is performing. Most of the times, market moves in cycles, and over the last few years, Indian markets were in an up cycle, thus attracting money from FIIs, and as the market now seems to be overvalued, they are selling off, and as they are not able to find attractive options here, they are moving out their money in other markets in search of better returns. We need to understand that FIIs invest where they anticipate the highest returns and not with any other bias, and currently, the most in-demand sectors are AI, GPUs, and storage, which do not have a base in India right now.
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