If you are expecting the FII’s
Rs 1.16 trillion to come back, well forget it. The same funds will never come
back and have to wait for a considerable time to get inflows back. Macro reasons
for slow growth, falling quarterly results and a strengthening dollar are all secondary
aspects supporting the testimonials of outflow but not getting into the real
reason behind the fall down. The biggest question stands now how long the DII’s
will keep investing when the FII’s will take time to get back. But more than
this we need to know who did the exit from Indian markets which led to turning India
into a worst-performing within the emerging markets. Equity AUM of FPIs fell
from $930.36 billion on 30 September to $823.77 billion on 15 November, according
to data from National Securities Depository Ltd (NSDL).
Our memories are short hence we forget things quickly. Sebi has made an objective selection of certain FPIs which qualify to be under the ‘high-risk’ category. The identification was done based on two important criteria points.
Now in its consultation paper,
Sebi estimated high-risk FPI AUM to be around ₹2.6 lakh crore (as of March
31, 2023) which would be around 6% of total FPI AUM and 1% of Indian market
capitalisation. They released the circular and the same circular, which was
amended in March 2024, directed FPIs to disclose their ultimate beneficiaries by
9 September 2024. Those FPIs who did not do the same simply exited the market in
October and November 2024.
By 9 September 2024, a
critical deadline was imposed on Foreign Portfolio Investors (FPIs) operating
in India. All FPIs failing to comply with new regulatory requirements were
mandated to liquidate their positions and exit the market, as their FPI
licenses would become invalid. Non-compliant FPIs exited the market, resulting
in substantial outflows. This capital flight likely exacerbated the decline in
the Nifty 50, which fell 6.5% during the period. The forced
selling by non-compliant FPIs disrupted market stability in the short term,
amplifying selling pressure and affecting liquidity. This is the reason why
this money will not be coming back so early and hence we will have to wait to
gain confidence, making valuation attractive for Indian stocks and improving the
quarterly results to boost optimism for the FPIs. Further depreciating currency makes FPI’s not look
for investments towards India. Why they will buy it so expensive?
Between September 30 and
November 29, 2024, the Nifty 50 experienced a substantial decline, while other
major EM indices displayed mixed trends. The Nifty 50 dropped by 6.5%, falling
from 25,810.85 on September 30 to 24,131.10 on November 29. This decline
reflects broader market concerns, potentially driven by macroeconomic
headwinds, geopolitical uncertainties, or domestic policy challenges. On the other
hand, the other markets performed well. These five markets collectively
accounted for 80.01% of the MSCI Emerging Markets Index as of
October's end.
In contrast, the Shanghai
Composite remained relatively stable, decreasing by just 0.3% to 3,326.46. This
suggests resilience in the Chinese market, possibly due to supportive
government policies or better-than-expected economic data.
The Taiex index posted a
modest gain of 0.77%, closing at 22,262.5. This indicates investor optimism,
likely fueled by the technology sector, which plays a pivotal role in Taiwan's
economy.
The Kospi rose by 5.29% to
2,455.91, showcasing strong performance. This could be attributed to robust
corporate earnings and a favourable global demand environment, particularly for
semiconductors.
Brazil's Bovespa declined by
4.66%, ending at 125,668. This drop may reflect political uncertainty,
fluctuating commodity prices, or concerns about inflation and interest rates.
The money did not go till now to any other country but it might go if the dynamics of the Indian market do not become attractive. Further, for those who are thinking that tariff actions against China will be favourable for India well Business men Cum President Trump will barter hard with India. Hence volatility will rule for now until clarity comes up. We are also just one month away from 3rd quarter results of FY-25 hence that will also decide the fate of sectors, stocks and allocation. This will be keenly observed by the FPIs to get directions for investment. On the other hand, DII’s will find significant inflows in JFM from NPS, Insurance, EPFO, ELSS etc products which are all linked to the market. Hence it’s a wait-and-watch mode. Invest through STP and SIP to take advantage of the current phase. Don’t be surprised to witness some more corrections based on geopolitical rationales.
On the other hand, the U.S. market is projected to climb to new highs in CY-2025. It is now a tough game to find an opportunity to invest in India. The U.S. economy grew at nearly 3%, defying recession fears and supporting corporate profitability. Record employment and low layoffs bolstered consumer spending. Inflation trended closer to the Fed’s 2% target, alleviating cost pressures on businesses. Unlike 2023, gains were not limited to a few tech giants. Financials (+35%), utilities (+28%), and industrials (+25%) all posted strong returns.: Even an equal-weighted S&P 500 index rose 18%, indicating widespread participation in the rally. Now the question is why India and why so early they will get back? India will need some time to make the market attractive for investing even for the short term.
1 Comments:
Very effective
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