look news india
There has been an environment of ups and downs in the Indian stock market for some time, the biggest reason behind which is the continuous selling by foreign portfolio investors (FPIs/FIIs). The market may be holding itself together on the strength of domestic investors and mutual funds, but everyone on Dalal Street is looking for the answer to just one question: when will foreign institutional investors (FIIs) return to the Indian markets in a big way? Market leaders and financial experts believe that it may take some time for the flow of foreign funds to resume in the Indian market. According to experts, the path of return of FIIs is not so easy and for this the market is facing big challenges on three very important fronts, which are very important to be resolved.
Big challenge of high valuations and tough trend of interest rates globally
According to experts, the first and biggest challenge before foreign investors is the high valuation of the Indian stock market. Indian stock prices are currently very expensive compared to global markets, due to which foreign fund managers are shying away from investing new money here. Along with this, the tough stance adopted by the US Federal Reserve and other global central banks regarding interest rates also remains a major obstacle. Unless there is a clear trend of reduction in interest rates globally and the valuations of Indian markets do not become a little attractive, foreign investors will avoid taking big risks in Emerging Markets and will keep looking for safe havens.
Impact of geopolitical tensions and crude oil prices on the domestic economy.
The second biggest obstacle in the way of return of foreign investors is the continuously increasing geopolitical tensions at the global level. Due to ongoing conflicts in different parts of the world, supply chains are being affected, creating an environment of uncertainty in the global economy. This tension has a direct impact on the prices of crude oil. India imports a large part of its oil needs, so a rise in crude oil prices could increase domestic inflation and fiscal deficit. Foreign investors are well aware that crude oil inflation can affect the profits of Indian companies and the country’s economic growth rate (GDP Growth), hence they are currently adopting the strategy of ‘wait and watch’.
Pressure of slowness of quarterly results of domestic companies and weakness of rupee
The third and last most important challenge is the slowdown seen in the corporate earnings i.e. quarterly results of Indian companies. In the last few quarters, the pace of profits of many big sector companies has not been as per expectations, which has alerted FIIs. Along with this, the real returns of foreign investors also reduce due to fluctuations and weakness in the Indian Rupee (Rupee vs Dollar) against the Dollar. Market analysts clearly say that unless there is a strong improvement in the financial results of domestic companies and the rupee stabilizes, it will be too early to expect a big and sustainable return of FIIs to the Indian markets.
