Stock markets: FIIs bullish - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Stock markets: FIIs bullish

May 16, 2003

One good indicator of investor confidence in an economy and its stock markets is seen from the level of foreign institutional investments. In the Indian context, foreign institutional investors (FIIs) seem to have been the laggards. The graph below may indicate that there is a reasonably strong correlation between FII investments and Sensex movement over the years. However, FII investments as a percentage of market capitalisation of the BSE Sensex is still too low and this has led us to believe that FII investments in the country are not directly responsible for any strong movement in the Indian indices.

Influx of FII money into capital markets is a good indicator of the valuation and/or growth prospects of not only the country's capital markets but also of the economy as a whole. It must be noted here that stock markets tend to reflect the country's growth prospects. Strong FII participation is also good from the domestic investor point of view in the sense that it leads to enhanced market capitalisation and increased investor confidence.

On the other hand, over-dependence on FIIs could be devastating for the stock markets because when these institutions pull out their money from the markets, it leads to panic amongst small investors. Retail investors are the biggest losers in such a scenario. Again in the Indian context these worries are not warranted as FII investments as a percentage of total market capitalisation of the indices is still too low. Even though we feel that there is no direct correlation between FII inflow and the movement of indices, we believe that Indian investors tend to take a cue from FIIs. This indicates an indirect influence of FII investments on Indian sentiments and consequently the stock markets.

Considering the above argument the heartening news is that since the beginning of 2003, FIIs have been actively buying into Indian equities (over US$ 900 m to date compared to about US$ 650 m in the corresponding period last year). Apart from the strong fundamentals of the country, there could be other factors that could have added to the increased inflow of FII investments into India. One major reason could be the outbreak of the Severe Acute Respiratory Syndrome (SARS) in China and its neighbouring countries like Honk Kong and Singapore, which are some of the key investment destinations of the FIIs.

Going forward, it seems that the interest of the foreign institutional investors will continue towards India, as it is one of the fastest growing economies in the world. Moreover, with the governments measures towards reforms (banking and power) and infrastructure development economic growth will be fueled further thus creating value for investors over the long term.


Equitymaster requests your view! Post a comment on "Stock markets: FIIs bullish". Click here!

  

More Views on News

BSE Sensex Surges 707 Points; BHARTI AIRTEL Among Top Gainers (Market Updates)

Sep 25, 2020 | Updated on Sep 25, 2020

The BSE Sensex Surged 707 Points; BHARTI AIRTEL Among Top Gainers. Find the latest update, special reports and news on all time high gainers of BSE Sensex at equitymaster.com.

Your Queries on the 8-Year Cycle Answered (Fast Profits Daily)

Sep 25, 2020

You've sent in your queries on my videos on the 8-year greed and fear cycle in the market. I'll answer them in this video.

It's When You Sell that Counts (Profit Hunter)

Sep 25, 2020

How I alerted readers to the impending crash last week.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

How to Save Money by Exiting Stocks Before They Fall podcast (Views On News)

Sep 24, 2020

A penny saved is a penny earned. It doesn't matter where you enter. All that matter is where you exit. Watch this video to identify an opportune time to exit your investments and book profits.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 25, 2020 03:36 PM

MARKET STATS