Foreign outflows from Indian markets may slow this year as asset values have corrected, the head of the nation’s central bank said at an event Friday, according to a speech copy made available on its website.

The country’s net capital account position should be better than last year, Reserve Bank of India Governor Sanjay Malhotra said at an event organized by a fixed income industry body in Amsterdam on Friday, according to the speech copy.

Malhotra’s comments come at a time when the rupee is marking new lows, pressured by overseas withdrawals from Indian assets.

The rupee has declined more than 5 per cent so far this year, ranking as Asia’s worst performer, while the benchmark Nifty 50 stock index has lost 8 per cent. The index is now trading at about 18 times its 12-month forward earnings, lower than its one-year average of 20 times.

Global funds are selling Indian equities at a record pace as an energy shock from the US-Iran conflict threatens to derail the outlook for the oil-importing nation. Overseas investors have pulled more than $20 billion from local shares this year, with capital rotating towards artificial intelligence-linked markets.   

While elevated energy prices pose challenges for India, some of those headwinds should be offset by capital flows emanating from the numerous free trade agreements that the country has signed, Malhotra said. 

Over the past few months, India has signed trade pacts with various partners, including the UK, the European Union and New Zealand.

The Governor also said that if the global Indian rupee market were to be popularized, local banks would need to evolve as international market makers, noting that domestic lenders were dealing with overseas entities rather than end-users. 

The observation comes after the RBI temporarily placed sweeping curbs on offshore rupee trading in April as the currency hit record lows amid risks to India’s inflation and public finances from the oil price shock of the Iran war. While those steps had helped the rupee, the currency has resumed its slide, marking a record low on Thursday.

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Published on May 2, 2026