Every decent sized capital market in the world depends on a few important factors viz. the health of that economy, the ease of cash flow, the governance systems in place in that country and of course how attractive it is to outside money (read Foreign Institutional Investors appetite – FII MONEY).
Over the last two decades, India has changed in every way possible. From a small sized capital-market we are now amongst the biggest in the world with a market capitalisation (the combined value of the listed companies) touching the 5 TRILLI0N USD mark. And this continuous upward movement has been largely driven by the two principal buyers – The foreign and the domestic investors. Foreigners held close to 20% of that market cap till 2020 which was about 20%-21% of the total market ownership and this was a staggering 950 billion (1 billion USD is about Rs. 9500 crores). The FIIs found Indian markets attractive because of better valuations – meaning there was loads of opportunities and the cornerstone of investment practice they hold dear – GROWTH AT A REASONABLE PRICE – was in the very attractive zone. There were numerous companies that were available at cheaper rates and the growth was also significant making the PRICE TO EARNING TO GROWTH ratio very attractive.
However, for nearly the better part of this decade the picture has changed. The FIIs have been selling relentlessly over more than 5 years and the Indian markets have stood their ground inspite this because of the domestic investors coming in their millions and propping up the markets through their exposure to the mutual funds and the insurance driven ULIPs. The reversal of this has resulted in the FIIs selling off nearly INR 9 lac crores cumulatively and of course the DIIs have been the buyers. This is not to indicate that the Indian markets have become unattractive. But it of course means that other markets had become more attractive than ours in the eyes of the FIIs.
However there seems to be a change happening. Of late the FIIs have been aggressively buying into INDIA and aggressively selling on a lot of the emerging markets like KOREA, CHINA, INDONESIA and others. The tech frenzy driven by insane AI valuations, unrealistic chip makers premium and earth- shattering EV company’s prices are perhaps becoming more rational and expectations have become muted.
Is this the time when Indian stocks are primed to take off?? Valuations have become reasonable, corporate results have been better than expected, the monsoon seems to be settling well and significant macros are reasonably placed. If it is so then await the huge growth expected in the markets. The last two years stagnation cannot continue forever and it already seems to be in the very long stage since prices rebounded. Can you imagine where we could go with both the foreigners and domestic investors working in tandem!!!
Stay invested. Add to your equity kitty. Focus on India.
