A typical theme that has dominated fairness market conversations over the past six months is whether or not home institutional traders (DIIs) ought to preserve funding the relentless exodus of international institutional traders (FIIs) from Indian markets.
Specialists, talking on the Mint India Funding Summit and Awards 2025 in Mumbai on Saturday, nevertheless, mentioned traders ought to look past the “us vs. them” mindset, as falling markets often have barely any correlation with FII promoting.
“It’s a idiot’s errand to second guess what FIIs are going to do as there isn’t a correlation between FII promoting and markets falling, besides the most recent one,” mentioned Devina Mehra, founder, chairperson and managing director of First International.
Mehra mentioned that between 1994 and 2003, FIIs have been invested in India even when the web return on the broader index was 0%.
Market individuals shouldn’t connect any form of morality to the FIIs’ present rush for the exit and never see them as fleeing the home market, mentioned Sanjoy Bhattacharyya, managing associate at Fortuna Capital.
Since September 2024, FIIs have been web sellers of Indian shares, pulling out over ₹1 trillion between October 2024 and February 2025. At a yearly degree, FIIs pulled out over $15.46 billion in 2025 up to now, in comparison with an influx of $21.43 billion in 2023 and an outflow of $17.02 billion in 2022.
Indian equities’ overvaluation relative to its friends and a tepid company earnings development trajectory led to the most recent exit of FIIs. Proper now, market individuals are sitting tight within the face of looming world commerce wars and a recession within the US.
Specialists, nevertheless, mentioned the opportunity of a US recession stays much less of a priority as of now. Reasonably, they’re extra involved about India’s credit score development points and the nation not having the ability to absolutely make the most of its demographic dividend.
Regardless of these challenges, Bhattacharyya mentioned, the nation’s financial fundamentals are sound sufficient to consolation traders for now and home equities have turned fairly valued following the most recent bouts of correction. “So, if costs fall meaningfully additional, it might be an excellent time to take a position,” he added.
Echoing the same view, Mehra mentioned traders shouldn’t sit out of the market within the face of present market volatility and remember the fact that the heroes of the final bull run won’t lead the subsequent upcycle. “There’s cash to be made out there, not simply from the identical set of shares you’ve misplaced your cash in,” she mentioned.
Whereas encouraging elevated bets on home equities, consultants mentioned portfolio diversification is extra important now than ever. “Diversification is the one free lunch within the trade, which supplies you that additional protecting cowl in opposition to market volatility,” mentioned Bhattacharyya.
Portfolios must be diversified throughout geographies and never simply asset lessons or sectors. The upper the extent of diversification, the extra predictable are the ultimate returns, mentioned Mehra.
Nevertheless, Bhattacharyya cautioned in opposition to over-diversification as nicely. “The typical mutual fund has 75-80 shares. The one factor about diversification is that something good in life may be taken to extra. And if you personal such numerous shares, you lose among the advantages of diversification as a result of there are what are referred to as cancelling-out results (in portfolios),” he mentioned.
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