Foreign Institutional Investors Turn Their Back On China, India Gains

China has not been in a good light with respect to its economy post covid. Foreign Institutional Investors (FIIs) are termed as not so stable investors and are most likely to jump out of a market as soon as the growth trajectory of the economy is not in the positive direction. 

This time, China is facing the wrath as foreign institutional investors have been flocking to Indian stocks, resulting in a $9 billion catalyst in the first quarter of FY24. 

Foreigners have been the largest buyers of Indian equities in this fiscal year so far, with daily average purchasing of around 1400 crore.  Domestic institutional investors have only bought worth about Rs 6500 crore as compared to Rs 72000 crore by FIIs. 

NSDL records show that FIIs have been net sellers only on 8 days out of 51 trading sessions in FY24. FIIs have only been net sellers on 8 days out of 51 trading sessions in FY24, according to NSDL records. 

Insiders claim that China's loss is India's gain as the Chinese economic recovery that was seen earlier this year lost steam in the second quarter, which is why the Nifty rose 8.5 per cent in the June quarter to levels that are close to all-time highs.

Anuj Gupta, Vice President, Research, IIFL Securities says,“Due to political and economically stability in India, it is rising in comparison to China as China is still fighting Covid & there is a constant fear of slow down amongst investors. China will roll out more stimulus support for its slowing economy this year, and Chinese central bank is expected to cut down interest rates. On the another hand, India is rising with stable policies and low inflation which will pave its path towards economic stability."

According to Refinitiv data, after selling $659 million worth of mainland Chinese shares in April, foreign investors sold $1.71 billion worth of those shares in May.

Markets in Japan and South Korea have also benefited from the waning of the China re-opening theme, in addition to India. South Korea's Kospi is up 17.5 per cent this year, while Japan's Nikkei is up 30 per cent.

Although, Chinese shares have recovered after its central bank had rate cuts, experts are of opinion that the probability of sustained FIIs inflow in the Indian market is extremely high.