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FPIs may appear cautious on India, but veteran investor Samir Arora believes the recent outflows need to be understood in context rather than viewed as a structural shift.
Speaking to ET Now, Arora explained that headline FPI numbers often mask what’s really happening in the market. “From the Fed’s January-end to now, combined FPI flows are about zero. But in the last one and a half months, the sentiment was hit by two things – a negative surprise on tariffs and weaker-than-expected corporate results,” he said.
A big chunk of the selling, he argued, is not traditional FPI money moving out but rather private equity investors booking profits from successful IPOs. “These investors are not selling because they prefer China or Korea. They’re selling because they’ve held stocks for five to seven years, made money, and now it’s time to exit. It gets classified as FDI or FPI, which distorts the picture,” Arora noted.
He added that traditional FPIs remain constructive on India. “It’s the same end investors – sometimes they invest through private markets, sometimes through public. Their exits are making the numbers look negative. But it’s not a negative view on India,” he clarified.
Pointing to global trends, Arora highlighted that while the S&P 500 is up 10% this year, the world excluding the US is up 25% in dollar terms. “There is a shift from US to non-US markets, and India has a claim in that. Recent weeks have been negative, but this will sort itself out,” he said.
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On the domestic front, Arora expects portfolio allocations to evolve. With the government likely to focus more on consumption by cutting GST and slowing capex spending, investors may lean towards consumer-facing stocks. “If the consumer has more money in hand, the sector will benefit. But it’s not as simple as saying soap and shampoo sales will rise. The basket has changed,” he explained.He also pointed out that the ₹1 lakh crore tax cut in Budget 2024, which reflected in reduced monthly TDS, gave households additional liquidity. “A lot of that money was wasted in F&O and gaming platforms like Dream11. With curbs on such avenues, part of this disposable income will find its way into the real economy – maybe even golgappas or an extra day of ordering in,” he quipped.In short, while foreign flows may look shaky on the surface, Arora believes India’s bigger story remains intact. “Plus-minus a few weeks or months, this will even out,” he said.
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