From the start of the COVID-19 pandemic, the Indian market saw panic selling by foreign institutional investors (FIIs). FIIs so far this year have been heavy sellers. Spooked by war and inflation worries, the selling spree shows no sign of abating.
Raamdeo Agrawal, Chairman of Motilal Oswal Financial Services, spoke with CNBC-TV18 on FII outflow shock amid negative global cues. He was not optimistic that FIIs will return.
Agarwal also believed the current outflow may continue in the near term with more intensity. The analyst observed that FIIs have not been in retreat mode in other emerging markets (EMs).
FIIs started selling Indian equities in October last year. They sold shares worth a net $20.7 billion since October 1, according to the Securities and Exchange Board of India. So far in 2022, FII sales have totalled $15.9 billion. As of April 24, they have sold $2.36 billion of shares.
Adding to the pain is the resurgence in Covid-19 cases in China, elevated inflation, oil prices, war uncertainties, and supply issue.
Last time, you made a point that FIIs will feel painful to reenter into the Indian markets. Today's Motilal Oswal note says FII ownership has shrunk to a multi-quarter low in the markets. The Nifty 500 and Nifty 50 have been trimmed by almost 60% and 72% respectively quarter-on-quarter in terms of FII ownership. When do you think FIIs will return? Now, the dollar is also expensive.
When will the FIIs come back is the million-dollar question. Before they come back, now the exits will be with more intensity. I have no clue.
It looks like directionally, they might keep selling because the other emerging markets are much cheaper. Indian markets are not correcting deeply. So, they are very high.My understanding is that FIIs may remain subdued or selling at margins. But, whenever they come back, retail participation will increase in India. They have sold it without emotions and will also sell without emotion. It will be fun to see how they buy next.