'India's Correlation To Global Markets Has Fallen Drastically' Foreign Institutional Investors are currently underweight on Indian equities at historically low levels, Ridham Desai said. The underweight in domestic stocks is partly due to India’s classification as an emerging market. "The EM cohort that was once attractive in the 1990s is no longer the same. Many assets in emerging markets are shrinking, and India is facing some of that impact," Desai said. However, Morgan Stanley expects FII flows to return in the coming weeks or months, as India has significantly underperformed China. "I underestimated China's policy stimulus. Initially, it seemed ineffective, but it ultimately marked the bottom for Chinese stocks and the top for Indian stocks. Now, the relative valuation chart looks very attractive for India."