FIIs to Remain Bullish on India

We keep saying that the importance of FIls reduces as domestic participation in Indian equity market increases. However, we don't stop tracking FIls activity, do we? There is a reason why we do so. Yogesh Supekar highlights FIls' participation and explains why Flls cannot ignore a growth market like India

- Yogesh Supekar

This November was one of the sweetest for equity investors as the BSE Sensex climbed by an impressive 3.24 per cent. Interestingly, these gains of little over 3 per cent pushed the BSE Sensex to all-time highs and made it a memorable month for investors. What is notable in the recent market moves is the huge inflow from FIIS.

FIIS pumped in almost USD 3 billion in just 10 trading sessions by November 9, thus indicating huge interest in the Indian markets. While the FIIs have been net buyers in 2022, the question is whether they will remain net buyers in 2023 as well. To understand what can be expected of FIIs in 2023 it is important to note why FIIs showed interest in 2022 in the Indian equity markets. Some of the strong reasons why the Indian market was favoured by FIIs in 2022 include:

1) Indian Markets' Outperformance: When the global equity markets were trading with high volatility with a strong downtrend, the Indian equity market showed to the world what stable growth can do your portfolio returns. The table below highlights the Indian equity markets' outperformance over the developed markets and other emerging markets.

The relative outperformance of the Indian benchmark indices was the biggest trigger for the global investors to flock the Indian markets. The global fund managers could not miss the opportunity to generate alpha by investing in India when the other developed and emerging markets were generating negative returns.

2) Relative Strength of Rupee: One of the significant highlights of 2022 was the relative strength of the Indian currency. Even though the rupee weakened by per cent in 2022 the slippage was much lower when compared to the other currencies. The table below highlights the relative strength of the rupee versus other currencies. The strength shown by the rupee implies prospects of higher returns on portfolio investments.