Foreign investors trim Indian equity holdings, but long-term prospects remain strong: Arvind Chari of Q India (UK)

Despite the recent sell-off, foreign holdings in India remain substantial. "That $200 billion of foreign money had grown to about $950 billion at its peak. After the $25 billion sale and market correction, it stands at around $800 billion. So this sale is less than 5% of what foreign investors own in India," he noted.

While foreign investors have sold approximately $25 billion worth of Indian public equities since October last year, Arvind Chari believes that this does not signal an exit from the Indian market.

While recent headlines show that foreign institutional investors (FIIs) are sellers, the broader picture suggests a more measured perspective. "If I look at a 20-year period, foreign investors invested about $200 billion in Indian markets at cost. Meanwhile, Indian mutual funds, buoyed by domestic investors, have invested $160 billion in just the last 10 years," Arvind Chari, Chief Investment Officer (CIO) of Q India (UK) said.

Chari was speaking at a Quantum Mutual Fund event on Friday in Mumbai. Q India (UK) is an affiliate of Quantum Adivsors Limited.

Despite the recent sell-off, foreign holdings in India remain substantial. "That $200 billion of foreign money had grown to about $950 billion at its peak. After the $25 billion sale and market correction, it stands at around $800 billion. So this sale is less than 5% of what foreign investors own in India," he noted.

He adds that the data suggests that FIIs are not exiting India but rather adjusting their allocations. "They still have $800 billion worth of Indian equities. And I believe that will change and increase," he added.

Chari explained that India remains underrepresented in global investment portfolios. "The global AUM (assets under management) is estimated at about $300 trillion, while Indian equities at their peak accounted for just $1 trillion—only 0.3% of the total. Meanwhile, India’s weight in global GDP is about 4%, and in the global stock market, it's about 4.5%. That means foreign investors are under-allocated to India."

Encouraging both domestic and international investors, he added, "As that message spreads—and that’s part of my job—foreign investors will increase their exposure. Over the next 5 years, 10 years, 20 years… you will see more investment flowing into India. So, if you do not have investments in India yet, start allocating now. This is a great time to build a long-term portfolio."

Invest in a “12-2-80” strategy

Speaking at the same event, Chirag Mehta, CIO of Quantum AMC added that investors should look at investing in a Amid market uncertainties, experts at Quantum advocate a proven asset allocation strategy to weather market fluctuations. "If you follow this, it's one of the time-tested tools available that will help you sail through any market conditions," Mehta explained.

Their 12-20-80 formula suggests keeping 12 months' expenses in a safe asset, allocating 20% to gold, and 80% to equities. "Equities are for the long term, but allocation across market caps is crucial," they emphasized. This strategy, according to Mehta has historically provided strong returns while minimizing drawdowns, offering investors a balanced, resilient portfolio.