Are Foreign Investors Heading Back to the Indian Stock Markets? - Chart Of The Day 3 December 2018 - Equitymaster

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Are Foreign Investors Heading Back to the Indian Stock Markets?
Dec 3, 2018

In the past, I've written about the structural change in investor behaviour in the Indian stock markets - the phenomenal rise of the Indian investor.

For a very long time, foreign investors were the dominant forces in the Indian markets. Their influence on the market movements used to be so significant that many market participants would closely follow FII flows.

But that has changed over the last two years. There's been a flood of domestic liquidity pouring into the Indian stock markets.

The domestic liquidity has been one of the key reasons that kept the market relatively buoyant despite the exodus of foreign investors.

Today's chart shows the monthly trend in foreign investor flows since the start of the current financial year.

Here are some key takeaways:

  • As you can see, foreign investors have been net sellers of Indian equities in six out of the last eight months.
  • On two occasions, foreign investors were net sellers for three consecutive months.
  • The month of October witnessed one of the worst monthly outflows from the Indian markets.
  • While there was net buying in July, November has been the only month that has witnessed sizeable foreign investor inflows.
  • For the financial year so far, foreign investors are still net sellers of more than Rs 500 billion worth of Indian equities. That's higher than the foreign investor outflow witnessed during the global financial crisis of 2008-09.

So, while the net FII inflows in November are a positive sign, whether the inflow will continue is contingent on several domestic and global macro factors.

Data Source: CMIE
*As on 29 November 2018

This Chart Of The Day was published in The 5 Minute WrapUp - Will 2018 Have a Happy Ending for Indian Investors?

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