Capital Flight

The Chinese markets are benefitting from the government’s stimulus. They have been on the rise.

Real Estate has been one of the biggest drivers of the rise of the Chinese economy. Whenever you see any video touting the rise of China, you will see the factories, the infrastructure, and the buildings. Their real estate market has been in bad shape primarily because of the amount of leverage in the system. With the relaxation of interest rates in China, homebuyers are again beginning to look at opportunities. This has caused a surge in the stock market.

Beijing’s stimulus has shifted the focus of global fund managers to China and foreign investors have pulled out $7.9 billion from Indian stocks so far in October, the highest since March 2020.

Source: Reuters

Foreign funds pulled out a huge amount of cash from India?—?nearly 65,000 crores.

The total investment by FIIs in the Indian stock exchanges stands at about 17.76 Lac Crores, today. This translates to about $217 Billion. $8 billion out of that is a small amount.

Something else is afoot, Investments through Systematic Investment Plans (SIP) stood at about 24,000 crores per month and rising. That is about $3 billion being added to the market every month and rising.

The quantum of money being infused through such passive investment strategies is huge!

So while the FII exodus took a toll, it was not that bad. The Sensex dropped less than 5%.

If you look at the FII investment chart above, in the best year, they invested about $40 billion into the Indian markets. At the current pace, Mutual Funds will invest close to $40 billion into the market during the current year.

During 2024–25, FIIs have deployed 86,000 Crores into the markets while through SIPs people have invested over 1,30,000 Crores.

If this rate of growth continues, in 5 years the Mutual Funds in India will dwarf FIIs investing in the country. Hopefully, this should make the market far more stable and immune from the vagaries of what the Fed or some other central banks do.

So long as Indians continue to believe that Mahendra Singh Dhoni and Sachin Tendulkar are rich because of their Mutual Fund investments, this trend should continue.