FIIs to reduce selling in India towards year-end, fresh allocations to occur
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
After their heavy selling so far, it is expected that the foreign institutional investors (FIIs), will reduce their selling near the end of the calendar year and fresh allocations or significant investments are likely to occur once there is greater clarity regarding the US' incoming Donald Trump administration's policies, market experts said on Saturday.
Several factors have led to the selling activity by FIIs in the Indian stock market -- weak earnings, high valuations compared to other markets, and global economic influences such as rising US bond yields.
"While some of the selling by FIIs in the secondary market is being counterbalanced by buying in the primary market -- through large initial public offerings like those from Swiggy and Hyundai -- it is expected that FIIs will reduce their selling as we near the end of the calendar year," Waterfield Advisors' Senior Director, Listed Investments, Vipul Bhowar said.
Fresh allocations or significant investments are likely to occur once there is greater clarity regarding the Trump administration's policies.
"FPIs this calendar year have been reducing their weightage in mature sectors when growth would be closer to our nominal GDP and allocating capital to high-growth businesses. For example, in the financial sectors, FPIs have been increasing allocation in Capital Market themes like Asset management, exchanges, and healthcare," said Bhowar.
FPIs turned net sellers in October, withdrawing $11.5 billion (in equity, debt and hybrid categories) compared to an inflow of $11.2 billion in September.
The equity market saw a record-high net outflow of $11.2 billion (vs an inflow of $6.9 billion in the previous month) in response to the rise in Chinese equities following the announcement of aggressive fiscal stimulus measures, according to the latest Crisil report.
Domestic financial conditions in India are in the comfort zone despite the FII outflows. The new framework established by the RBI and te SEBI for reclassifying foreign FPIs as FDIs is expected to positively impact foreign inflows into India, said experts. This framework provides greater flexibility for foreign investors and reduces barriers to entry.
"With the new regulations, FPIs can hold larger stakes in Indian companies without the need for immediate divestment. This creates opportunities for increased foreign investment, particularly in mid-cap companies, and helps attract long-term capital," said Bhowar.
