Here are three reasons why Foreign Institutional Investors (FIIs) are anticipated to continue buying Indian equities in the fiscal year 2024-2025:
- Positive Economic Outlook: One of the primary reasons driving FIIs’ interest in Indian equities is the positive economic outlook for the country. India’s economy has been showing signs of recovery from the impacts of the COVID-19 pandemic, supported by robust government policies, structural reforms, and strong corporate earnings. The country’s GDP growth is expected to rebound, which makes Indian equities an attractive investment option for FIIs seeking growth opportunities.
- Favorable Monetary Policy and Liquidity Conditions: The accommodative monetary policy stance adopted by the Reserve Bank of India (RBI) is conducive to foreign investment inflows. With the RBI maintaining a low interest rate regime and pursuing liquidity-enhancing measures, including quantitative easing, liquidity conditions remain favorable for investors. This liquidity-driven environment encourages FIIs to allocate capital to emerging markets like India, including the equity market, to seek higher returns.
- Anticipation of Upcoming Elections: Elections often serve as significant events that impact market sentiment and investment decisions. In India, the anticipation of upcoming state or national elections can influence investor confidence and trigger increased FII inflows. Political stability and policy continuity following elections are perceived positively by investors, leading to higher equity investments. As India gears up for various state elections in FY25, FIIs may view this as an opportune time to invest in anticipation of potential policy reforms and economic development initiatives by the new or re-elected governments.
Overall, a combination of positive economic indicators, accommodative monetary policies, and anticipation of favorable political outcomes are expected to sustain FII interest in Indian equities in the fiscal year 2024-2025. However, global factors such as geopolitical tensions, monetary policy changes in advanced economies, and fluctuations in commodity prices could also influence FII investment decisions in Indian markets.
Sources Of Information: Moneycontrol
