Analyzing Two Decades of FII Investments in the Indian Equity Market: Trends, Dips, and Implications

Investing Strategies
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I’ve recently compiled data on FII (Foreign Institutional Investors) investments in the Indian equity market from 2002 to 2023 and thought it would be enlightening to share some insights and spark a discussion on the topic.

Key Insights:

  1. Consistent Growth Periods:
  • From 2002 to 2007, investments consistently rose, with a notable peak in 2007, more than doubling the previous year’s investment.
  • Post the 2008 dip, we saw a sharp rebound in 2009, with 2010 marking an unprecedented surge.
  1. Dips and Outflows:
  • 2008 stands out with a significant net outflow of -41216 crores, correlating with the global financial crisis.
  • Other years like 2016, 2018, and notably 2022 also recorded net outflows, indicating significant shifts in market dynamics or global conditions.
  1. Recovery Phases:
  • The resilience of the Indian market is evident with sharp recoveries post outflows, as seen in 2009 after the global crisis and in 2023 following the 2022 decline.
  1. Overall Trend: Despite periods of outflows, the overall trend from 2002 to 2023 remains positive, showing the Indian equity market’s attractiveness for foreign investments. However, the considerable variability in investments post-2010 suggests evolving global economic conditions influencing FII decisions.
  2. External Factors & Correlations: These investment patterns undoubtedly correlate with global and domestic events. The 2008 dip can be tied to the global financial meltdown, while other fluctuations might resonate with domestic policy changes, political stability, and overall economic performance.

I’d love to hear your thoughts on these observations, especially if you can correlate these trends with significant events or policies during these years. How do you see these FII patterns influencing future market behavior, and what could this mean for individual investors?

Looking forward to a fruitful discussion!

Here is the raw data, that I compiled from NSDL website
(Everything in crores)

2002: 3682
2003: 35158
2004: 42050
2005: 41664
2006: 40590
2007: 80906
2008: -41216
2009: 88002
2010: 179667
2011: 39358
2012: 163342
2013: 62280
2014: 256214
2015: 63657
2016: -23081
2017: 200048
2018: -80919
2019 : 135995
2020: 103156
2021: 50089
2022: -132815
2023: 140294

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They are the movers, as Indian retail who earn 5 lakhs per month to 10,000 per month have many venues to invest, and equities are just one among them. So when the big money, which in most of the cases is also the smart money, comes in, the participation increases, just because the prices are going northward. Indian retail participation may have been acting as cushion for sometime now, I am not too sure if this can be considered as permanent. Participation without some understanding and some objective cannot be relied upon, so the current scenario may not be a structural shift. If it is, then it is beneficial.

FIIs may continue to invest, as a lot of things are going in favor of India, stable government, reforms, formalization, capex, GDP forecasts, younger demographics, so they may continue with their investments, if not increase, and if they find similar opportunities elsewhere in other Asian geographies, they may cut down.

Come to think of it, if indeed FIIs decrease their presence, it appears, valuations will come down, so investing should be done considering the valuations too.

Just some thoughts.

2 Likes
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Hey @Unknown_Trader this is really nice data. Can you share the link if NSDL webpage from where you took the Data?

Thank you. :slight_smile:

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Sure Here is the link: Current Month (Trends in FPI/FII Investments)

at the time of posting this comment, this website is unreachable (don’t know why)
but keep trying later

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