{"id":8449,"date":"2022-10-06T04:25:21","date_gmt":"2022-10-06T04:25:21","guid":{"rendered":"https:\/\/blog.researchandranking.com\/?p=8449"},"modified":"2025-11-06T23:57:25","modified_gmt":"2025-11-06T18:27:25","slug":"foreign-institutional-investors-india","status":"publish","type":"post","link":"https:\/\/www.equentis.com\/blog\/foreign-institutional-investors-india\/","title":{"rendered":"Why Did Foreign Institutional Investors (FIIs) Come Back To India?"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div>\n<p>According to financial analysts, a record Rs 4 trillion left the equities market as the&nbsp;<strong>Foreign Institutional Investors in India<\/strong>&nbsp;<strong>(FIIs) <\/strong>exited the market. Per NSDL data the&nbsp;<strong>Foreign Institutional Investors&nbsp;(FIIs)<\/strong> in India<strong>&nbsp;<\/strong>sold Indian equities worth Rs 214217 crore in Indian markets from the beginning of FY2021-22 till June 10, 2022.&nbsp;<\/p>\n\n\n\n<p>This persistent selling of equities by <strong>Foreign Institutional Investors in India&nbsp;(FIIs)<\/strong> drove the equities&nbsp;<strong>market<\/strong>&nbsp;to its lowest in over a decade. However, the trend over the past couple of months seems to be reversing. With more buying versus selling, the&nbsp;<strong>return of FII in India<\/strong>&nbsp;looks imminent.&nbsp;<\/p>\n\n\n\n<p>Before we try to understand this reversing trend, let\u2019s look at some of the key reasons that drove the <strong>FII<\/strong> out of the <strong>equity markets<\/strong> in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Shift in the Sentiment of Foreign Institutional Investors (FIIs) in India for the Equities Market<\/h2>\n\n\n\n<p>It is essential to understand what changed for the&nbsp;<strong>FII in India<\/strong>&nbsp;that led them to offload such enormous amounts of holdings in 15 months.&nbsp;Analysts believe several factors contributed to this paradigm change in sentiment of the <strong>FIIs in India<\/strong>.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Central banks around the world tightened liquidity following Fed rate hikes making the dollar stronger.<\/li>\n\n\n\n<li><a href=\"https:\/\/www.equentis.com\/blog\/10-common-effects-of-inflation-on-the-economy\/\">Inflation<\/a> had hit the roof globally.<\/li>\n\n\n\n<li>The conflict between Russia and Ukraine resulted in a record price rise in crude oil worldwide.<\/li>\n<\/ul>\n\n\n\n<p>The central banks purchased bonds from commercial banks and financial institutions to curb inflation and pump more money into the system. It also helped to keep the interest <a href=\"https:\/\/www.equentis.com\/blog\/old-tax-regime-slabs\/\">rates<\/a> under check. However, this was not a permanent solution, and buying bonds to minimize liquidity in the financial system was not a viable long-term option for central banks.<\/p>\n\n\n\n<p>It made the&nbsp;<strong>FIIs&nbsp;<\/strong>withdraw their <a href=\"https:\/\/www.equentis.com\/blog\/mukul-agrawal-portfolio-shareholdings-investments-all-you-need-to-know\/\">investments<\/a> from emerging markets like India and take their funds to more financially stable destinations such as Indonesia and Brazil.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Reasons for the Return of the Foreign Institutional Investors in India<\/h3>\n\n\n\n<p>The aggressive selling by the&nbsp;<strong>FIIs in India&nbsp;<\/strong>saw a dip after a consistent selling spree. As recently as August 2022,&nbsp;<strong>FIIs&nbsp;<\/strong>pumped investments worth Rs 16,175 crores into Indian equities.&nbsp;<\/p>\n\n\n\n<p>The&nbsp;<strong>FIIs in India&nbsp;<\/strong>are currently cherry-picking stocks and taking advantage of high-value stocks in the Indian equities market that is in a price correction mode. It confirms that&nbsp;<strong>Foreign Institutional Investors&nbsp;<\/strong>are back with renewed interest in the equities market in India.&nbsp;<\/p>\n\n\n\n<p>Let\u2019s look at the reasons for what triggered this U-turn.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Expectations in Rate Hikes:<\/h3>\n\n\n\n<p>Central banks globally are expected to slow down on interest rate hikes. According to a poll, Reuters conducted in July 2022, economists who expected a 100-bps rate hike by the US Fed are predicting a hike of 75 bps.&nbsp;The European <a href=\"https:\/\/www.equentis.com\/blog\/why-startup-investments-are-booming-a-startup-investors-guide\/\">Central Bank<\/a> initiated a rise of 50 basis points, double what the economists had expected.&nbsp;<\/p>\n\n\n\n<p>The central bank moves worldwide, and a weakening dollar considerably lowered the risk sentiments of&nbsp;<strong>Foreign Institutional Investors in India&nbsp;<\/strong>in the equities market. Hence, the FIIs sitting on a pile of cash started seeking new investment opportunities in the Indian&nbsp;<strong>equities market<\/strong>.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Resilient Earnings Outlook:<\/h3>\n\n\n\n<p>Market gurus predict that the consensus net debt\/EBITDA for BSE500 may experience a fall to 1.1x for the FY23E as opposed to the range of 3.0-3.5x recorded in the three years in the pre-Covid era. The banking system has also decreased below 6% due to non-performing assets.&nbsp;<\/p>\n\n\n\n<p>Therefore, compared to major Asian economies, specifically China, a country still experiencing structural problems, the outlook on earnings for Indian corporate seems not only resilient but also promises future growth for&nbsp;<strong>FIIs in India.&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Attractive Valuation:<\/h3>\n\n\n\n<p>A price correction in Indian equities may also be why&nbsp;<strong>Foreign Institutional Investors in India&nbsp;<\/strong>are back with their investments in the equities market. Compared to its long-term average of 21x, over the remaining months of the financial year 2022-23, Nifty&#8217;s expected earnings via trade will continue to be at its current 18x.&nbsp;<\/p>\n\n\n\n<p>Given the market dynamics, the&nbsp;<strong>FIIs<\/strong>&nbsp;possibly did not wish to lose complete exposure to the <a href=\"https:\/\/www.equentis.com\/blog\/stock-market-in-india\/\">Indian stock market<\/a>, given that the <a href=\"https:\/\/www.equentis.com\/blog\/key-global-events-that-can-influence-the-stock-market-this-week-3\/\">global<\/a> economy is still recovering from rising inflation.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Macro Factors:<\/h3>\n\n\n\n<p>The Reserve Bank of India and the central government have managed to limit the skyrocketing inflation rate to below 8%. According to RBI projections, the inflation rate may decrease to below 6% by March 2023.<\/p>\n\n\n\n<p>Credit growth has witnessed a recent uptick, and the collections from GST have also picked up a steady pace. As a result, credit card spending in India is at an all-time high. The manufacturing purchasing managers&#8217; index (PMI) recently touched a record 8-month high, and the real estate industry is also gathering consistent momentum after several months of low to moderate growth.<\/p>\n\n\n\n<p>All of these macro factors instill trust and confidence of&nbsp;<strong><strong>FIIs in India<\/strong>&nbsp;<\/strong>in the equities market and, by extension, the Indian economy.&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><strong>Click&nbsp;<a href=\"https:\/\/www.equentis.com\/investment-advisory\/5in5-wealth-creation\">here<\/a>&nbsp;to get your personalized a portfolio of 20-25 potential <a href=\"https:\/\/www.equentis.com\/blog\/5-nse-multibagger-stocks-to-watch-for-in-2025\/\">multibagger stocks<\/a> for 2022.<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\">FII Buying is Important for India<\/h3>\n\n\n\n<p><strong>Foreign Institutional Investor in India&nbsp;continues<\/strong> to play a critical role in sustaining the Indian economy and acting as a market performance catalyst. The overall inflow of the Indian economy is still under the heavy influence of&nbsp;<strong>Foreign Institutional Investor<\/strong> as they invest a significant amount of money in securities such as banks, <a href=\"https:\/\/www.equentis.com\/blog\/what-are-mutual-funds-a-comprehensive-guide\/\">mutual funds<\/a>, and more that drive the Indian&nbsp;<strong>equities market<\/strong>.&nbsp;<\/p>\n\n\n\n<p><strong>Read more:&nbsp;<a href=\"https:\/\/www.livemint.com\/brand-post\/research-ranking-s-model-portfolio-clocks-79-gains-11638187095790.html\" target=\"_blank\" rel=\"noreferrer noopener\">About Research and Ranking<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to financial analysts, a record Rs 4 trillion left the equities market as the&nbsp;Foreign Institutional Investors in India&nbsp;(FIIs) exited 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