FIIs Pull $40 Billion From India In Two Years, Know- What Is Keeping Foreign Money Away?
Mumbai: Foreign institutional investors (FIIs) have pulled around USD 40 billion from Indian equities over the past two years, even as the economy continued to expand strongly, signalling a deeper shift in how global investors view the Indian market. A September 21 Bernstein report, 'India Strategy: When will FIIs return?', suggests that traditional triggers such as GDP growth and interest-rate…
Over the past two years, foreign institutional investors (FIIs) have removed approximately USD 40 billion from Indian equities despite a robust economy. A Bernstein report highlights that traditional factors like GDP growth and interest-rate differentials are losing influence over foreign investments. While domestic investors have put in nearly USD 300 billion, FIIs have only made around USD 4 billion in net investments.
In the latest 24-month period, FIIs withdrew USD 56.3 billion, a sharp contrast to the previous 24-months where they had brought in USD 38.6 billion. The once-strong correlation between GDP growth and foreign investments has weakened, as has the link between interest rates and FII flows. Currency movements, particularly the rupee's performance against the US dollar, are now crucial in determining FII decisions.
The rupee's depreciation can negatively impact returns for dollar-based investors even if Indian equities perform well. Despite this shift, valuations remain expensive, with India's average relative valuation at 162% over the past two years. As a result, Bernstein predicts that FII flows will remain flat to slightly positive over the next 12 months.
A true resurgence in foreign investment may hinge on India's ability to create globally competitive businesses in sectors like semiconductors, batteries, energy storage, defence, space, and deep-tech.
Written by urgent.news from Free Press Journal's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
