Volatile Markets Hit Sovereign, Central Bank Investments in India 2025

• Sovereign wealth funds' assets in India declined 2.3% in 2025 to Rs 5.2 lakh crore, the first fall since 2018, with equity assets down 1.8%.
• Foreign central banks' equity holdings in India dropped nearly 14% in 2025 to Rs 1.61 lakh crore, marking the first decline in three years.
• The slowdown is attributed to India's weaker market performance, elevated valuations, earnings downgrades, and limited exposure to the AI theme.
• Despite tax incentives, sovereign funds and central banks prioritize market outlook over incentives, mirroring broader FII behavior.
• In contrast, foreign pension fund assets in India continued to grow by 14% to Rs 6.99 lakh crore, driven by their long-term investment horizon.

Why It Matters: Volatile markets and India's relative underperformance in 2025 led to a significant slowdown in sovereign and central bank investments.