FIIs are making a beeline for India, causing the steep surge in the markets

TL;DR: FIIs are making a beeline for India, causing the steep surge in the markets. Out of $7.5 billion invested in emerging markets in Aug 22, India commanded the Lion's share of $5.7 billion. Experts say the trend will continue & that we should take advantage of dips to grab their favourite stocks

FIIs had sold $33 billion & sent markets crashing. Experts had then recommended a buy

In the period between between October 2021 and June 2022, FIIs were on a relentless selling spree. They sold equities worth a colossal $33 billion. This caused the markets to go into a tailspin.

However, experts were unanimous that the FIIs would return to their favourite hunting grounds and that we should anticipate that and buy up their favourite stocks in advance.

Akash Prakash, who runs a FII Fund named Amansa Capital, had alerted that foreign investors are very optimistic on the long-term outlook for India and will return sooner than later.

"I have not seen investors this optimistic on the long-term outlook for India in years. A combination of geopolitics, erratic policy-making and the downside of extreme centralisation of power with no checks and balances has combined to cool sentiment towards China. The events and policies of the last 18 months in China have introduced an element of uncertainty and risk that investment committees and boards are uncomfortable with," he had said.

"This is the time to build portfolios of the best businesses," he had rightly clarified. (link)

Madhu Kela had also done plain speaking on the subject. "A lot of these factors, whether it is war or oil price, as suggested by history, are not going to be here permanently. Once these worries go away from the market, it is very-very difficult to get these quality companies at such valuations. As and when this FII flow starts to turn positive, the market will become very-very strong," he had stated (link 1) (link 2)

Vijay Kedia endorsed this sentiment by pointing out that the FII selling was very small compared to the investments they have made over the past 30 years. He expressed confidence that the FIIs would soon return and start buying stocks. As the DIIs would be unwilling to sell, stock prices would surge (link)

FIIs have returned. Markets are up 17% since June 2022

According to a report in the ET, overseas investors poured a net $7.5 billion into nine regional markets so far in August, the biggest monthly inflow since end-2020. India accounted for the lion’s share as foreigners pumped in $5.7 billion, while South Korea received $2.3 billion.

This has caused the Indian markets to surge. In fact, the markets are up 17% from the June 22 lows.



The report quoted an expert named Herald Linde, head of APAC equity strategy at HSBC Holdings Plc, who opined that the inflows into India would continue.

“A trend reversal has emerged in the case of Indian equities, as FIIs turned net buyers in July after nine months of relentless selling,” he said.

"An improving outlook for the economy and corporate earnings is boosting confidence, and the market’s relative appeal has also increased as China struggles with a property crisis and sporadic Covid lockdowns," it was added.

Navneet Saluja D'Souza of Compcircle PMS Fund pointed out that FIIs have so far invested about $2.5billion in the recent past which is merely 10% of what they pulled out. It is implicit that if the FIIs even return into Indian stocks what they have redeemed so far, the Indices will touch new highs.