FIIs unlikely to return in large numbers without new growth engines in India: Bernstein
Foreign Institutional Investors are expected to remain cautious regarding Indian equities over the coming year. A report indicates that significant foreign investment will depend on India's competitiveness in various sectors. Trends show that foreign investment patterns have shifted due to changing currency valuations and market dynamics. Despite recognizing early progress in sectors like…
Foreign investors are unlikely to return in large numbers to Indian equities even after the artificial intelligence boom, according to Bernstein. The brokerage expects FII flows to remain flat to modestly positive over the next year, but cautions this would largely reflect easing recent challenges rather than a meaningful improvement in long-term investment factors.
Bernstein believes India needs to build globally competitive industries in areas like semiconductors, batteries, and energy storage to attract foreign capital. The brokerage notes early signs of progress in these sectors, but says most remain too small to significantly impact global capital allocation. Bernstein highlights currency movements, relative valuations, and forward earnings revisions as more important factors for foreign investors now, as the traditional link between FII flows and economic growth has weakened.
High valuations are also making it harder for foreign capital to find its way into India, as rising relative valuations have coincided with weaker FII flows in recent years. Bernstein believes sustained FII participation will depend on India creating a new generation of globally competitive companies.
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