Mumbai: Foreign institutional investors (FIIs) sold heavily in the March quarter, withdrawing nearly Rs 1.3 lakh crore from Indian equities. But this exit was not across the board. At the same time, FIIs increased their holdings in 120 companies, showing they are not completely negative on India.
Where FIIs Are Buying?
FIIs showed strong interest in midcap and growth-focused companies. Stocks like Vishal Mega Mart, Home First Finance, APL Apollo Tubes, and Clean Science saw more than 3 percent increase in foreign ownership. Even large companies like Vedanta, HCL Tech, NTPC, and Titan saw small but steady buying.
Sectors Driving Interest
Most of the buying is happening in sectors linked to India’s domestic growth. Financial companies, infrastructure-linked businesses, and niche leaders are attracting attention. For example, banks and housing finance firms reflect credit growth, while industrial companies benefit from infrastructure demand. Exchanges like IEX and BSE show long-term structural potential.
Why FIIs Are Cautious?
Despite selective buying, global factors are making investors careful. Rising crude oil prices, especially near USD 100 per barrel, are a big concern for India’s economy. Higher oil prices can increase inflation and widen the trade deficit, which makes investors nervous.
Impact of Global Rates
Another key reason is rising US interest rates. With US bond yields nearing 4.5 percent, global investors are getting better returns in safer assets. This reduces the appeal of emerging markets like India, especially when combined with currency risks.
Currency and Market Pressure
The weakening rupee, which crossed Rs 95 against the US dollar, is also hurting returns for foreign investors. Even if Indian stocks perform well, currency losses reduce overall gains. This has led to continued outflows and a more cautious approach.
What Lies Ahead?
Experts believe this is not a full exit but a phase of 'risk adjustment.' FIIs are waiting for clarity on global tensions and oil prices. Until then, selective buying in strong businesses is likely to continue rather than broad market investments.
