8/7/2019 FIIs are companies registered outside India

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FIIs are companies registered outside India. In the past four years there has been more than $41 trillion

worth of FII funds invested in India. This has been one of the major reasons on the bull market

witnessing unprecedented growth with the BSE Sensex rising 221% in absolute terms in this span. The

present downfall of the market too is influenced as these FIIs are taking out some of their invested

money. Though there is a lot of value in this market and fundamentally there is a lot of upside in it. For

long-term value investors, theres little because for worry but short term traders are adversely getting

affected by the role of FIIs are playing at the present. Investors should not panic and should remain

invested in sectors where underlying earnings growth has little to do with financial markets or global

economy.

It is always good to keep an eye on what the big movers are doing and plan individual strategy

accordingly. There are several reasons on FIIs selling, but there are three predominant factors that are

cited as being largely responsible.

1. The swings in the market forced several FIIs to withdraw from India and invest their dollars in other

emerging markets. Some of the other markets include Uruguay, Russia, the Ukraine, and several other

former Soviet countries. Though there have been swings in the past too but FII response this time was

different because of margin pressures back home as even they have to provide regular returns to their

investors.

2. The Indian markets are not seen as a good short-term bet any more. India is seen as a good

investment for the medium to long term. FIIs seem to fear the pace of growth and the fundamentals of

the markets.

3. Most FIIs are looking at corporate governance and execution abilities, which could be significant

drivers in creating a strong portfolio of Indian stocks. Recent action taken by the market regulator

indicates that the Indian government would like to moderate the inflow of FII money.

Though valuations are very attractive on a selective basis, but stock picking has to be done based on

evaluation of business fundamentals. The subprime issue and problems in the credit markets have

raised concerns about potential growth slowdown in the US and Europe. The fear of a slowdown will

likely continue to weigh on markets average FII redemptions in India have been lower than in otherAsian economics. FIIs do get affected by it. India is among the economies less sensitive to a deceleration

in US growth and one should not be perturbed by FII flows in either direction. One need not worry much

about the volatility of the market as it is influenced by temporary factors but the Indian story is still

strong. Markets cannot go in one direction all the times (upwards) which it was going. Volatility is too

good for the market as it helps in keeping the economy cycle moving and it will again help the values of

the stocks at a fair price for investments to again keep flowing and so will the FIIs too.

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