Indian equities witnessed record outflows to the tune of $24 billion from FIIs year-to-date, eventually washing out net inflows of a little over $23 billion seen from them in 2020.
The financial services sector, where FII holding is very high, saw net outflows of Rs 39,849 crore until September, way higher than the net outflows of Rs 1,342 crore seen in the same period year ago.
The aggressive rate hikes by the US Federal Reserve and central banks in Europe amid sticky inflation hampered growth significantly and triggered concerns of recession in the two global growth forces.
This saw FIIs book profits in equities and park their money in the haven asset dollar. The dollar index has risen more than 17% year-to-date and hit an over two-decade high of 114.78 in September.
“The major trigger for FPI selling is the sustained rise in the dollar and expectations that the dollar will continue to remain strong in the current global macro construct. A reversal in FPI selling will happen when the dollar shows indications of peaking and reversing,” said V K Vijayakumar, Chief Investment Strategist at
Despite heavy selling by FIIs, India has stood out tall in the global arena, shrugging off the global headwinds.
“If you need any proof that Wall Street and FIIs know next to nothing about investing, look no further than their India selling data in the past 18-20 months. It takes special idiocy to sell the best (performing) market in the world,” market veteran Shankar Sharma tweeted.
Thanks to the strong inflows from domestic institutional and retail investors, India has remained largely insulated from global economic shocks.
At a time when outflows from FIIs are at a record high, DIIs have hit a record in buying Indian stocks. They have net bought shares worth a record Rs 1.64 lakh crore so far in 2022.
But inflows from FIIs in the last two years have driven the sharp outperformance of India vs its peers, and the strong buying support from DIIs this year has helped them sustain it.
The phenomenal run-up in Indian equities compared to peers has led to a never-seen-before positioning in the MSCI Emerging market (EM) index. India’s weightage in the MSCI EM has doubled to 15.5% in two years from around 8% before October 2020, according to Nuvama Alternatives & Quant Research.
In terms of ranking within the emerging market basket, India is now on the second spot, followed by Taiwan and South Korea. This is in contrast to the 4th position it held in October 2020.
So if data is anything to go by, one could very well say that the party on D-Street is on with or without FIIs!
(With inputs from Ritesh Presswala)
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