We Indians might currently be ruing the heat and the election tamasha but looks like the FIIs are simply loving it all!
Till date, from 1st April to 16th April, FIIs have already pumped in a net of over Rs.11,000 crore into the Indian capital markets. This comes on the back of Rs.11,182 crore poured in during Feb and almost Rs.46,000 crore in March.
The biggest factor currently in favour of this love for India is the expected political stability once again at the center. 23rd might be the “official” date of election results but the FIIs seem to have already concluded that the BJP will come back to power, with Modi once leading the country. And it is this stability and continuance on governance and not some hotchpotch ‘mahaghatabadhan” which is the real lure for the FIIs.
Another reason is improvement in global liquidity which was set off by the change in stance by various central banks across the world.
Many analysts are of the opinion that this is flow of FII money into the country is really not India-centric. They feel it is more of a global phenomenon where money is finding its way into emerging markets. India is getting what many other emerging markets are also getting. The strong perception is that this love for India is more of emerging market trade than just India trade. Purely looking at this as an emerging market trading trend, it makes sense because a decline in US Treasury yields is directly linked to strong inflows from FIIs.
The earning season has also been relatively good till now. And this too, from a domestic perspective has bettered the lure in emerging markets for India.
Remember one big change has happened and this could change the entire dynamics of a market which is FII led – the number of people investing through Systematic Investment Plans (SIPs) is leaping. There has been a 38% (YoY) rise in SIP collections in FY19. According to data provided by the Association of Mutual Funds in India (AMFI), mutual funds collected a total of Rs 92,693 crore through SIPs in April-March FY19. MF industry has added 9.13 lakh SIP accounts on average each month with average SIP size at around Rs 3,070 per account. At present, domestic mutual funds have about 2.62 crore SIP accounts. With more money expected to come into SIP, even if FIIs sell, today the DIIs can hold fort.
Do we follow the FIIs? You and they are in two completely different situations and would be foolish to merely do what they do. FIIs/DIIs have peer pressures to follow their herd but we do not. Warren Buffett has often talked about the “institutional imperative” where like a herd, investors follow each other, even if they know it is not logical as they do not want to “miss out”; not having the guts to take contrarian calls. So do your own study, read balance sheets, track stock prices and history and then invest. If this is too much work, like what India is turning to, invest through SIPs in a sound company. That’s the best way ahead – your small money but big institutional buying/selling.