From last 2 Qtr. I had one stronger question on Indian markets and that was why will FII Come back to India?

US holds more than 60% + of the total Global Market, followed by China, Japan, Hong Kong and India, with India contributing less than 4% of global share—though still above its historical average of 2.7%. However, there is no incentive for an US investor to invest in Emerging markets like India, as seeing the USD returns of India is lower to parallel of USA Returns in 10 years scale.

Given this, why would FIIs—comprising sovereign wealth funds, hedge funds, universities, and pension funds—choose to invest in a market like India, where the risk is comparatively higher to invest in with high tax regime.

Practically, the only way India can attract significant FII inflows is by continuing to grow faster than other economies. A decade ago, several European countries, including the UK, were among the world’s top 5 economies. However, due to their slower growth rates and the rapid expansion of Asian economies, today 4 out of the top 5 global economies are in Asia.

Based on this parameter, here are some reasons that can bring FII back to India:

1. We outperform US markets in dollar terms when the dollar weakens.
2. We outperform China and capture a larger share of global business.
3. India is well-positioned to benefit the most from emerging global developments.
4. We correct Lesser than the other markets.
5. A change in the tax regime for FIIs can act as a major catalyst.

With this Tariff change, most of the boxes can be clicked:

1. India is the least affected by their neighbours in comparison to the US tariff, powering India to be stronger against the peers.
2. The relationship between Mr. Trump and Mr. Modi is strong, which could potentially bring additional benefits to India.
3. A loss for China is clearly a win for India, as the US sees India as the next best alternative to take over China’s share of global business.
4. India is a Neutral country that even offers an advantage to do business with neighbouring countries, we fall lesser than our neighbours.

The Hidden Gift in Macro Shifts

Every biggest macro change comes with some surprise opportunities as a gift, you know it is a gift, but don’t know what is in it, and that makes this gift more interesting, with this Tariff Change there will be certain sectors which will get highest benefit, and this new story can be the reason of India’s contribution to grow from 4% to 10% in world markets followed by FIIs getting more attracted to India as an emerging market to a future developed economy.

Regards, 

Rohan Mehta – CEO & Fund Manager Turtle Wealth

Ruchir Sharma Interview:

https://www.youtube.com/watch?v=g_lRwCucsK0&t=1543s&ab_channel=IndiaToday

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