Un­cer­tainty Over State Polls Hold­ing FPIs Back from Al­lo­cat­ing More to In­dia

The Economic Times - - Money -

the last few years has gone into mid­caps, lead­ing to the Nifty Mid­cap 100 in­dex hit­ting an all-time high. Gross in­flow into eq­uity mu­tual funds ev­ery month is around ₹ 11,000-12,000 crore while net in­flows are in the ₹ 5,000-7,000 crore range. These are the high­est ever for eq­uity mu­tual funds.

The in­flows have made up for in­con­sis­tent for­eign in­vestor par­tic­i­pa­tion.

Ex­clud­ing Fri­day’s pur­chases amount­ing to ₹ 8,000 crore, mostly for HDFC Bank shares af­ter over­seas own­er­ship fell be­low a 74% limit, for­eign in­sti­tu­tional in­vestors (FIIs) have bought eq­uity worth only about ₹ 1,000 crore this year.

This is one of the key rea­sons why large caps have been rel­a­tive un­der­per­form­ers. Bro­kers said US Fed­eral Re­serve chief Janet Yellen’s re­mark that rate in­creases are on track will keep in­flows low. Last week, Yellen said the Fed­eral Re­serve in­tends to raise rates three times this year and pos­si­bly even at the up­com­ing meet­ing in March. As global growth is start­ing to pick up, par­tic­u­larly in Europe and US, emerg­ing mar­ket funds will tar­get coun­tries that ben­e­fit more from that.

“Given the val­u­a­tion and also the fact that flows are likely to go to EMs which will ben­e­fit more from pickup in global growth, you will not see the big flows (into In­dian mar­kets) com­ing back soon,” said An­drew Hol­land, CEO, Aven­dus Cap­i­tal-Al­ter­nate Strate­gies.

Un­cer­tainty over the out­come of state elec­tions, es­pe­cially Ut­tar Pradesh, is also hold­ing for­eign in­vestors back from al­lo­cat­ing more money to In­dia.

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