- FII Flows In India
- Market sentiment
- India-Pakistan Tensions
- Tariffs
- Export opportunities
- Foreign capital inflows
In a rare reversal of fortunes, Foreign Institutional Investors have returned to India, channeling an impressive Rs 32,465 crore into the domestic market over eight consecutive sessions, defying the prevailing backdrop of heightened India-Pakistan tensions. A myriad of factors, including a weakening dollar and a resilient Indian economy, have coalesced to boost FII inflows, despite fears of trade and security threats.
Factors Influencing FII Flows
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, attributes this FII surge to two key drivers. Firstly, the dollar’s relentless rise has turned the tables on momentum trade towards US equities. The dollar index plummeted from its peak of 111 in mid-January to a current value of 99, rendering the allure of US stocks less enticing.
- Reduced volatility in emerging markets.
- Lower dollar prices.
Secondly, Dr. Vijayakumar highlights the expected downturn in US corporate earnings, which is likely to affect the US economy and subsequently, corporate earnings, whereas the Indian economy, with its growth rate above 6%, stands in stark contrast, offering a more attractive investment prospect.
Optimism In The New Financial Year
Manoj Purohit, Partner & Leader of Financial Services Tax at BDO India, has expressed an outlook of heightened optimism regarding FPI inflows at the start of the new financial year. Though the week saw net FPI inflows in the red, the mood remains cautiously positive for both India and FPIs, given the resurgent market scenario.
“Despite the headwinds, our view remains intact that the FPI flows will be largely positive, with some minor corrections in between, given India’s robust economic fundamentals and business-friendly policies.”
Purehit highlights India’s distinctive advantages. With reciprocal tariffs imposed on Indian goods being less stringent compared to other Asian nations, the country presents a compelling export opportunity.
