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FIIs Not Very Bullish at the Moment
May 8, 2017

It's no secret that FIIs dominate the Indian markets.

Despite record inflows into mutual funds, it is the foreign investor that drives stock prices.

Keeping this in mind, it always helps to get an idea of FII sentiment.

Today's chart highlights an interesting development. Relative to India's market capitalisation, foreigners are less enthused about India compared to some other emerging market countries.

As per an article in the Business Standard, FII flows in 2017 have been impressive at US$ 6.3 billion. But it is only 0.32% of the market cap of the Indian stock market.

1% is considered a sign of a full-fledged bull market. FII flows were 1.04% of market cap in 2014 when the markets were on a roll after the NDA came to power.

Things have not been great since then. The lack of big bang reforms was one reason why FIIs have been cautious.

However, the biggest reason has been the failure of earnings to catch up with valuations.

So far, the indices have rallied about 12% this year. If FII flows continue at the current pace and the markets absorb the huge flows, it could result in a bubble.

The only way that can be avoided will be due to a pickup in earnings. Our Sensex 40,000 call is based on the same premise.

Data Source: Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - When Kattappa Killed the Gullible Investor

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