Foreign institutional investors pulled about 2 lakh crores from Indian markets this year, but Ganesh Komma argues they're likely to return. India's underweight in emerging-market portfolios, moderating valuations, improving earnings, and recent policy cuts create the conditions for a comeback.
Foreign investors have been pulling out of Indian markets over 2 lakh crores sold this year alone. But here is the twist that could soon reverse Right now India is underweight in global emerging market portfolios, the lowest FIA allocation since 2009 even though our macros are strong. FIIs went chasing cheap valuations in China and other emerging nations, but things are shifting. Valuations here though still premium about 25 times versus 16 times for emerging market peers are finally moderating here in India. Combine that with improved earnings growth of these Q2 results and strong ROE return on equity and India starts to look attractive again. Even data shows that FII holding in mid caps is stabilizing signaling a potential bottoming out. And with a double digit profit growth expected this quarter and plus policy tailwinds like your GST rate cuts and income tax reliefs, the setup looks strong for a re entry of foreign money into India. So the stage seems set for FII to make a comeback, especially as global funds rebalance from Korea, Taiwan and China back towards India. Markets may just be entering their next leg of FII led rally. Follow more for some deep insights like this and a simplified and straight to the point discussion. Follow more and subscribe below.
