FII FPI sale: Rs 4 lakh crore gone in 15 months! 3 factors why FIIs are reluctant to buy Indian stocks

NEW DELHI: Despite the Sensex rally of around 1,400 points last week as domestic investors profited from bottom fishing in troubled waters, foreign investors remain elusive on Dalal Street. Spot market data from Sebi shows that REITs sold shares worth more than Rs 4.1 lakh crore in the primary market.

“REITs have sold Rs 4.1 lakh crore over the past 15 months in the CM (cash market) segment in primary markets. This time, the pace and the amount are much higher than in 2008, which hurts the Indian market. As the real tightening cycle returns after decades of low interest rate era, global investors seem to be considering a new asset allocation strategy,” said Jisang Yoo, CEO of Mirae Asset Capital Markets, at ETMarkets.

On the other hand, domestic investors have bought shares worth around Rs 3.3 lakh crore over the past 15 months and have absorbed more than 80% of sales from foreigners so far. The average monthly SIP flow is Rs 12,100 crore this quarter. 5 years ago, this average monthly throughput was only Rs 3,700 crore.

He cites three major reasons why REITs are reluctant to return to emerging markets, including India:

  1. Crude oil prices have corrected since last week, but one of the reasons for this is the looming concern of an economic slowdown, as supply issues continue to exist.
  2. Due to the rise in US rates, emerging currencies could lose their appeal. The US Fed raised interest rates by 75 basis points and Powell confirmed that there will be a series of such giant leaps this year. Many investors are worried about the depreciation of the Indian rupee, especially since the RBI hike cycle is slightly lagging behind the rate hike cycles of other countries.
  3. Foreign investors are worried about the Indian economy’s ability to overcome inflationary pressures. They are looking for the assurance of a continued higher rate of growth in the years to come. The current account deficit is also widening.

The veteran market expert, who follows emerging markets closely, said that for foreign investors to return to India, there should be clear signs related to easing inflationary pressure and Indian businesses need to show signs of growth. solid profits.

If there is a global recession, India will also see lower earnings estimates.

While the main Nifty index is 817 points away from officially entering the bearish zone, Yoo said Dalal Street has been a relative outperformer against other emerging markets. “One of the main reasons is domestic investors. Retail money through SIP mutual funds provided good support for major indices,” he said.

Currently, Nifty is at a 1-year forward PE multiple of 17.4x from the peak of ~27-28x. “Among all other emerging markets, India is still premium. However, I don’t want to say India is expensive since India’s valuation has always been higher compared to other markets over the past two The premium has become justified due to income growth.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts belong to them. These do not represent the views of Economic Times)

Leave a Reply