FIIs are mostly done with selling in Indian markets, says Samir Arora of Helios

Helios Capital founder Samir Arora

Market veteran and Helios Capital founder Samir Arora said on November 14 that the recent spate of selling seen in Indian markets by foreign institutional investors (FIIs) is 'mostly' done.

Speaking at CNBC-TV18 Global Leadership Summit, Arora said: "I think they (FIIs) are mostly done. Plus minus a few weeks, foreign investor selling should be over. Because the question in the beginning was whether they are selling India to buy China. So, that belief can be there that they are not selling India to buy China. But it appears that they were selling India to buy US or go back to US."

"FIIs selling Indian stocks are doing so primarily due to pathetic corporate earnings, rather than reallocating funds to the US or China," said Arora at a panel titled "Managing Markets: Is it time to be bullish or bearish?".

In the past few weeks, Indian markets have been facing the brunt of selling by FIIs to the tune of whopping Rs 1.2 lakh crore.

He added that the common narrative assumes investors may avoid China due to President Donald Trump's stance, but that may not necessarily be the case.

"Global investors may have minimal exposure to India, often around just 1 percent, compared to about 60 percent in US markets. It's unlikely they'd reduce their already small stake in India to increase their US holdings further,” he said.

During a panel discussion in the same event, he also said that the weak earnings might not change in the next three months. Rather, it would take another six-to-nine months for the earnings to come back.

Arora explained that the last three years have seen some of the lowest returns in history for Nifty, though the NSE 500 index, which includes mid and small-cap stocks, has fared somewhat better.

"Other than the last 5 years, the number looks a bit out of place with any other period," he said. However, he added that extending the period to seven years shows returns within the typical range, where "normal means that 13-14% for Nifty and 15-16% for the Nifty 500."

Arora said he continues to be short on the market in sectors such as consumer goods, some automakers, and a few micro lenders.

"My theory is that things that are doing badly, turn around very fast. And things that are doing well, don't stop doing well so fast. And I didn't know that this is so negative. I think in the next year it will be good," Arora said.

Regarding the newly elected US president's impact, Arora emphasised that Indian markets have no reason to turn negative. "While we may underperform compared to US markets, there’s no need for pessimism," he added.