FOREIGN INSTITUTIONAL INVESTOR
Let’s say you’re an institutional investor based in the US. You've got capital to deploy — but in today’s world, where do you put your money?
Here’s what you might be thinking:
The US economy could slow down. And thanks to the ripple effect, so could much of the world.
Inflation in the US might rise further due to tariffs.
The Fed could be caught in a bind — unable to cut rates easily.
US equity markets, while not prohibitively expensive, aren’t cheap either.
So, what are your options?
You could play it safe and park your money in US long-term bonds. They’re offering around 4% — not bad. But with inflation running hot, your real returns could end up disappointingly low. And your investors? They want more.
Next stop: US equities. But with growth slowing and valuations not quite correcting, it’s a tricky call. Will the returns justify the risk? You're not entirely sure.
So, you begin to scan the globe — looking for markets that could offer better risk-adjusted returns. And that’s when India starts to flash on your radar.
India looks promising. But here's the catch: for FIIs to shift capital meaningfully into emerging markets like India, they need to put on their RISK ON hat. And in the current environment, that’s unlikely to happen anytime soon.
Which means — for now — Indian markets will need to rely more on domestic retail participation to stay buoyant.
On the flip side, if FIIs believe the US dollar will continue to strengthen or that US treasury yields are heading even higher, they might pull money out of India. That could be a headwind for Indian equities.
Bottom line:
FIIs aren’t in a rush to return to India — at least, not yet.
Up next: “Should I buy equity now?”. Follow @mira money for more such updates.