FIIs flooding India: For how long will same interest continue among investors?

FIIs flooding India

Among all the Asia Pacific counterparts, India stands apart, in a league of its own.

Why?

Because, it has attracted the maximum amount of Foreign Institutional Investor’s (FII’s) interest so far in 2014.

In the month of August alone, the inflows were nearly $700 million, but, months of June, July attracted about $2 billion.

What does it show?

Only that the attraction for India among foreign investors is slowly waning away in the emerging market segment – as per a report by Bank of America Merrill Lynch fund for the month of August 2014.

It’s no exaggeration to maintain that Indian stocks are being dubbed as ‘overbought’ by foreign investors and hence, losing their interest.

Prime reasons:

  • The equity valuations has sky rocketed if the records for the past three months are to be believed. For instance, MSCI (India) PE multiple is at 40 per cent premium over that of MSCI Emerging Markets index.
  • FIIs have already invested a lot in Indian equities, having highest fund weight, what the past 5 years suggest. Already, FIIs hold around 23 per cent of market cap in 30 Sensex firm shares at the end of month of June – a record in itself.
  • Till there is no interest rate hike in the US, huge amount of hot money is available to be invested in emerging markets.

However, something worth note here is that despite everything, stocks from emerging markets (as category) are still under-owned than ever before.

Therefore, India may not see huge inflows of funds, but, it may still get a sizable chunk of cake to make merry. Cheers!

Ashish Pandey

I am a business and finance journalist who is currently employed at Financial Express and previously at Zee News. My areas of interest include business and foreign policy. You can reach me on Twitter at @ashuvirgo1984 or @eFundsPlus.

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