Foreign institutional Investors (FIIs) are always on a look out for better feed. They like active markets, growing economies, and stable currencies. India has been fitting their bill for past 2-3 years. In 2013 and 2014, India remained the most happening place for many global investors. Although the FIIs inflows were high even in the first half of 2015, they turned negative in the second half. Global investors were bullish on India ever since the Rupee started recovering from its August 2013 low. In 2014, the sentiment got more bullish since BJP presented Mr. Narendra Modi as its PM candidate for Lok Sabha Elections 2014.

However, the NDA Government has not achieved much of success under his leadership despite making efforts on several fronts. Corporate profits now suggest that recovery was never going to be as sharp as it was perceived. As Federal Reserve (Fed) talked of interest rate hikes and China lowered its currency, the Indian markets felt the heat as growth was still lacklustre and the sharp recovery was not in sight. This resulted in the FIIs stampeded in pre-budget sessions. The budget was probably the last chance for the Indian Government.

The government emphasized on the rural and agricultural development, as well as provided higher allocations to infrastructural development. Moreover, it also confirmed its commitment to containing the fiscal deficit to 3.5% in FY 2016-17.

Being content with these measures, the FIIs seem to have started returning to Indian markets, post budget.

Is Indian Market Set To Rally?

Data as on April 05, 2016
(Source: ACE MF, PersonalFN Research)

 From time to time, PersonalFN has written about why individual investors should not follow FIIs. At present, other emerging markets such as Taiwanese and Brazilian are receiving higher foreign capital inflows are trading at much cheaper valuations as compared to India. Although FIIs remain bullish in India even now, as denoted by the lowest fall they recorded among major emerging markets in 2015, incremental FII flows have become hard to come by.

The future looks uncertain as far as FII flows are concerned. Major reform such as the passage of the GST Bill may make global investors more bullish on India, and better corporate performance may also help. In the absence of these two drivers, the current market valuations may start to look expensive again. In such a case, FIIs may wait for an excuse to exit India, which could be anything from status quo on monetary policy, higher inflation or lower growth among others.

Rather than tracking FII inflows, individual investors should track their expenses and focus on their long-term financial term goals. To manage the integral volatility, the SIP route offered by mutual funds can be considered; but enough care should be taken to select winning mutual fund schemes for your portfolio. If you are someone who does not want to spend much time on doing your research, confused about which ones to opt for; you may consider PersonalFN’s unbiased mutual fund research services.

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