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Below the Quote on FPI by Alok Agarwal, Head - Quant & Fund Manager, Alchemy Capital Management 

"During periods of significant Foreign Institutional Investor (FII) sell-offs, Domestic Institutional Investors (DIIs) have played a stabilizing role in mitigating volatility and supporting market confidence. Additionally, the increasing participation of domestic retail investors through mutual funds has strengthened the market's internal support system, fostering a more stable investment environment.

Since the end of 2020, FIIs have net bought equity worth INR 1 tn compared to mutual funds, which have bought INR 6.2 tn. With 6 times more net buying, domestic institutions are becoming far more relevant in the last few years. (Source: Bloomberg)

The domestic funds are bullish on the Indian markets due to several factors. This resilience is attributed to the robust economic growth of India, effective monetary policy by the central bank, and record inflows from retail investors.

Domestic funds have greater confidence in the long-term growth story of India, driven by sectors like manufacturing, pharmaceuticals, and renewable energy. The growing financial literacy and an increasing investment culture among Indians have boosted fund inflows, further fuelling market optimism.

Predicting FII flows remains challenging due to their sensitivity to global economic and geopolitical developments. However, there are reasons to be optimistic about a positive trend in the future. India's strong economic growth, coupled with its political stability and ongoing structural reforms, makes it an attractive destination for global investors. Moreover, the increasing integration of India into global supply chains and its strategic initiatives in digital transformation and infrastructure development are likely to draw sustained foreign investments. While short-term volatility in FII flows is expected, the long-term outlook remains positive.

FII holding in India is already at a 10-year low. India is a unique large country with stability in government along with double-digit economic growth, double-digit corporate earnings growth and double-digit corporate ROE. In my view, FIIs can’t remain out for a long period of time."

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