Weak earnings might not change in the next three months and rather, it would take another six-to-nine months for the earnings to come back. ‘Maybe it would take six months for the earnings to come back, but they will come. We need fiscal or monetary help. And it will come. Have patience and wait,’ says Raamdeo Agrawal, Chairman Motilal Oswal Group

Foreign Institutional Investors have recently been on a selling spree in Indian equities, offloading over ₹21,000 crore in November so far. While traditionally seen as significant players, the reasons behind their exit and its implications for India’s stock market are complex and multifaceted.

Read more: Influence Of FII and DII Activity In The Indian Stock Market

Weak Corporate Earnings and Valuation Concerns

One primary driver behind FII outflows is India’s subdued corporate earnings. According to Raamdeo Agrawal, Co-founder of Motilal Oswal Financial Services, the current earnings are insufficient to justify high valuations, leading to a mismatch between market prices and growth potential. He notes, “Earnings are slowing down…but they will come back, perhaps in the next six to nine months.” Agrawal emphasizes patience for domestic investors, pointing out that a recovery will likely require fiscal or monetary intervention.
Weak earnings in sectors like technology and manufacturing, combined with global economic uncertainties, make Indian stocks less attractive to foreign investors. Agrawal advises investors to “focus on firms with direct customer engagement, such as food delivery, digital insurance, and quick-commerce platforms,” which are better positioned for long-term growth.

Shift in FII Focus and Global Market Conditions

The perception that FIIs are shifting from India to other markets, like China and the U.S., is prevalent. While these markets offer competitive valuations and higher growth potential, Agrawal highlights that foreign investors’ exposure to India has historically been limited—around 1% compared to nearly 60% in the U.S. This makes it less likely that FIIs are reallocating a significant portion of their investments away from India.
However, newly elected U.S. President Donald Trump’s positive stance on economic policies and cryptocurrencies has influenced global investors. Combined with India’s “pathetic” corporate earnings, these policies make the U.S. and China attractive alternatives. Despite this, Agrawal believes that India’s stock market could remain resilient, even if it underperforms relative to the U.S. in the near term.

Read more: US Elections: Trump Wins. What does it mean for India?

Patience and Long-Term Strategies for Indian Investors

Ramesh Damani, Ashishkumar Chauhan, and Manish Chokhani shared insights on effective strategies in the current market climate. Damani encouraged investors to remain invested in high-quality stocks and focus on compounding as a strategy to accumulate wealth. He stated, “In 30 years, I have learned that you cannot time the market. Invest in high-quality stocks for a longer period.”
Manish Chokhani, Director of Enam Holdings, highlighted the importance of infrastructure development and digital public infrastructure as growth opportunities. Chauhan added that sectors like technology and biotech, which attract substantial capital investments, offer potential for sustainable growth. These insights underline the importance of diversifying into promising sectors and maintaining a long-term view, regardless of market volatility.

Infrastructure and Financial Market Growth in India

Chauhan, Managing Director and CEO of the National Stock Exchange (NSE), outlined the progress made in India’s financial market infrastructure over the past 25 years. He pointed out that the country’s market was previously viewed as a “satta bazaar” but has now developed into a robust structure with clearing corporations and depositories supporting a market twice the size of India’s banking system.
Chauhan’s perspective highlights how far the Indian markets have come, emphasizing the role of market infrastructure in creating a stable environment for both domestic and foreign investments. This evolution also reinforces the long-term potential of India as a growing market, despite current short-term challenges.

Read more: October’s Shift: Foreign Investors Rethink Indian Bonds Amid Rising Yields

Final Takeaways for Investors

As FIIs continue their selling trend, Indian investors are advised to remain calm and focus on strong, high-quality stocks. Agrawal, Damani, and other market experts urge patience and a diversified investment strategy. As Agrawal notes, “When foreigners come back to buy, they won’t get the same prices. Maybe when they come back, the Nifty index will be 30,000.”
With a clear emphasis on resilience and informed decision-making, investors should focus on sectors positioned for long-term growth and prioritize patience in this challenging period. While FIIs may continue to sell, the consensus among experts is that their exit is temporary and that they are likely to return once the market stabilizes.

Source: CNBC-TV18 Global Leadership Summit