foreign money is flowing out of India at a near-record rate
on March 8 and 9, FIIs (Foreign Institutional Investors) pulled out a whopping $1 billion on each day of trading from the Indian markets. this followed a February which saw the worst sell off from FIIs in India since March 2020, upon the outbreak of the pandemic.
what is scaring foreign investors away from the Indian market?
these are some reasons why:
institutional investors are a vital cog of the financial markets. a large number of them are concentrated in financial powerhouses of the world such as New York, London, Singapore, etc. but with those domestic markets being more saturated, they have increasingly invested in emerging markets such as India which saw a record FII (Foreign Institutional Investment) inflow of $37.6 billion in FY21. but with market sentiment turning negative since the turn of the year, they have now withdrawn a total over $29 billion in FY22.
the takeaway here is that the outflow by itself may seem large, but in the bigger picture, it is also a reflection of the heavy inflow that came before. it is also an encouraging sign that domestic investors have stepped up their buying, showing faith in the Indian economy and company valuations.
naturally good investors, such as institutions with plenty of manpower and algorithms, look to invest when they can make profits and cash out when they might make losses. but with the heavy buying interest shown in the Indian market, one expects it’s only a matter of time until valuations become attractive enough or the global market sentiment flips for FIIs to flow back in.