FIIs Continue Their Robust Buying Strategy, Emerge as Key Market Driver
The Indian stock market has been on a rollercoaster ride in recent times, with the COVID-19 pandemic causing unprecedented volatility. However, amidst all the chaos and uncertainty, one group of investors has stood out for their unwavering confidence in the Indian market – the Foreign Institutional Investors (FIIs). Despite the challenges posed by the pandemic, FIIs have continued their robust buying strategy, emerging as a key market driver.
In the first half of 2020, FIIs have pumped in a staggering $7.2 billion into the Indian equity market, making it the highest inflow in a decade. This influx of foreign capital has provided much-needed stability to the Indian market, which was reeling under the impact of the pandemic. The FIIs’ confidence in the Indian market has not only boosted the stock prices but also helped in strengthening the Indian rupee against the US dollar.
So, what has prompted FIIs to continue their buying spree in the Indian market despite the global economic slowdown? The answer lies in the strong fundamentals of the Indian economy and the proactive measures taken by the Indian government to mitigate the impact of the pandemic.
India’s GDP growth rate, which was the highest among major economies before the pandemic, is expected to bounce back to 7.4% in 2021-22, according to the World Bank. This projected growth rate, along with the country’s young and skilled workforce, makes India an attractive investment destination for FIIs. Moreover, the Indian government’s focus on economic reforms, ease of doing business, and infrastructure development has further bolstered the confidence of FIIs in the Indian market.
Another crucial factor that has contributed to FIIs’ continued investment in the Indian market is the country’s strong healthcare sector. The pandemic has highlighted the importance of a robust healthcare system, and India’s healthcare sector has proven its resilience in the face of the crisis. The Indian government’s efforts to ramp up healthcare infrastructure and provide affordable healthcare services have not gone unnoticed by FIIs, who see immense potential in this sector.
Furthermore, the Indian government’s stimulus packages and relief measures to support businesses and individuals during the pandemic have been well-received by FIIs. These measures have not only helped in reviving the economy but have also instilled confidence in FIIs about the government’s commitment to support the market.
The FIIs’ buying strategy has not been limited to the equity market; they have also shown a keen interest in the Indian debt market. In the first half of 2020, FIIs invested $1.5 billion in Indian debt securities, which is a significant increase from the $1.2 billion invested in the same period last year. This trend is expected to continue as the Indian government has announced measures to attract more foreign investment in the debt market.
The FIIs’ continued investment in the Indian market has not only provided stability but has also helped in improving market sentiment. This has a ripple effect on other investors, who are now more confident about the Indian market’s prospects. The FIIs’ buying strategy has also helped in boosting the market’s liquidity, which is crucial for the smooth functioning of the stock market.
The Indian government has also recognized the importance of FIIs in driving the market and has taken steps to make it easier for them to invest in India. The recent decision to increase the FII limit in corporate bonds from 9% to 15% is a testament to the government’s efforts to attract more foreign investment.
In conclusion, FIIs have emerged as a key market driver in the Indian stock market, and their continued robust buying strategy is a testament to their confidence in the Indian economy. The FIIs’ investment has not only provided stability and liquidity to the market but has also boosted market sentiment. With the Indian government’s proactive measures and the country’s strong fundamentals, the Indian market is poised for a strong recovery, and FIIs will continue to play a crucial role in this journey.
