Is India a Worst Performing Market for FIIs in 2015?

BENGALURU: 2014 was indeed Modi’s luckiest year ever, owing to the growing economy that year. But that was back in the good old days, as today India is not just as exciting a market as it was in 2014. In fact the Foreign Institutional Investors (FIIs) are now looking to other emerging markets like China, which show a 30 percent rise in its stock markets. On the other hand India’s sensex growth remains in negative territory.

Does this mean India is the worst performing market today? Not as yet, but it will soon be if the FIIs starts withdrawing from the country. One cannot certainly stop the growth in other emerging markets but can sure mend ways to comfort the FIIs to stay put in India. Perhaps the Finance Minister could accelerate on the process of reducing Minimum Alternative Tax imposed on FIIs.  

But what is even more worrisome is that the same FIIs who have invested in India are now shifting their weightage of their global allocations to China. If this continues to happen further India might lose out on new investments. Also the global trend is such that the FIIs are now looking at oil exporting markets like Russia and Brazil again after their economies revived with rising oil prices. Another reason for this change in trend of FIIs is that as the U.S. economy recovers, there are brighter prospects of U.S Federal Reserve tightening monetary policy, which would mean a stronger dollar. This in-turn will affect current account deficit countries like India.

We all know that FIIs thrive on surplus economy and hate currency volatility, and hence look to invest in current account surplus countries like Brazil and Russia Another problem coming ahead is the poor economic recovery data which shows a severe demand crunch in rural belt which is facing a farm economy crisis. Companies across the country show weak sales especially in rural India. Even companies like L&T has said some of its plants are lying idle as demand for capital goods is very weak. The Aditya Birla Group has  deferred its revenue target of $65 billion by 3 years, to 2018.

These are definitely not good signs for the economy, immediate steps to revive the stock markets is the need of the hour.

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