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Foreign Investors Turn Sellers in May 2019
May 20, 2019

For most of my years as an analyst, I focused predominantly on identifying companies with sound long-term fundamentals, durable moats, and reasonable valuations, among other factors. Also called the bottom-up style of stock-picking.

I still believe that's how you should go about picking stocks for your portfolio. And that's how I cherry-pick stocks for you from the various premium services to which I have access.

But over time, I have come to appreciate the influence of macro trends on the stock markets. And I believe investors must be cognizant of these trends so that sudden external shocks don't catch them unawares.

For instance, the bullishness that we witnessed in the markets from March until mid-April was driven by renewed foreign investor flows into Indian equities.

One of the key reasons this money poured into India, including other emerging markets, was the shift in monetary policy stance by the US Federal Reserve.

The US central bank, until some months ago, was on track to hike interest rates and shrink the Fed balance sheet. But seeing signs of slowdown in the economy and the nervousness in the stock markets, it showed its willingness to turn dovish.

So, it's unlikely we'll see any interest rate hikes by the US Federal Reserve in 2019.

In fact, my reading suggests that the Fed may resume its easy money policies if the global economic slowdown persists and the markets gets jittery.

One of the key triggers for the ongoing market correction is the escalation in the US-China trade war amid increasing fears of a global slowdown.

The chart below shows how foreign money moved in and out of India over the last three months owing to the evolving global events...

Data Source: CMIE
*Figures for the latest month as on 16 May 2019

This Chart Of The Day was published in The 5 Minute WrapUp - Modi and Mr Market: My Verdict on Where the Markets Are Headed Now

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