Thread by @TheFactFindr

#NIFTY #FIISelling #THREAD

UNPOPULAR View : How Much More can FPIs Sell in India ?

(1) Latest FII holding in India is now at 17.9% which is almost a decade low.

(2) They appear to have sold in excess of Rs 2 Trillion in this 2022 alone…

BUT…

(3) absolute value of FII holdings is $611bn, which is still at almost all time high (just off from recent peak of $650bn)…

(4) the absolute value in 2019 end was $430bn….

(5) Essentially, FIIs have Barely Sold 5-7% of their Holding in India

And the Rationale to SELL

(7) India has done very well. The MSCI India is up +25% in 2021 and only 10% YTD 2022 whereas MSCI China was down -25% in 2021 and -22% in YTD 2022

(8) EM sand APAC is largely a CHINA Story. This point is just so under appreciated

(9) Due to the good Relative OPF of India, Indias weight in EM Funds is generally OWT. And India Fwd PE is far higher than its highest level in 2008… more like a 60%+ premium… which it does not deserve… why You might ask…

(10) let’s go back to 2007/08. At that time, Indias ROE was 50% higher than the ROE of EM. The reason was EM didn’t have guys like Alibaba, Tencent, JD.com, TSMC (very Sizeable weights today)
back in 2007/08, once could justify a 60% PE prem for 50% higher ROE

(11) TODAY however, the ROEs of India are Similar to Emerging Markets and so we CANNOT Justify the Higher PE Premiums.

Also due to the SEVERAL DISRUPTIONS, Indias MIDDLE CLASS Consumer Story is NOT GROWING … india was an INTERNAL consumption Story which is QUESTIONABLE

(12) Also for a FPI, US provides a far better ROE Story than India. What NOBODY TELLS you is that US has returned more than the NIFTY on a 5 year and 10 year basis despite the correction in the US. INR itself has Depreciated by 3.5% CAGR in the past 10 years

(13) There is a serious QUESTION on wheather there is a CASE TO INVEST IN Emerging Markets long term? (I AM NOT SURE… I would use a barbell Strategy but that’s a personal view - 12 yrs already and EMs continue to UPF).

SO…

(14) About 83-85% of the FPI money in India is NOT INDIA DEDICATED. So they can happily REDUCE India Exposure… and As i mentioned earlier, they have ONLY SOLD 7% of thier India Holding. I understand that EM/APAC funds are yet to get REDEMPTION calls …

(15) Remember, everything is NOT about Valuations. It’s about FLOWS in the next 6 to 12 months …. Only a 5yr view, it’s can be about Valuations & Fundamentals

Will try and write a thread on HOW SUSTAINABLE are RETAIL Flows in India

(16) ONE VERY UNPOPULAR data point and TRUE. How much have Indian Retail Investors Bought of the Indian Stockmarket ?

Surprisingly Domestic Retail Investors between Mid 2017 and TODAY (March 2022) have BEEN FLAT in their %OWNERSHIP of the Indian Stock Market.

REQUEST: kindly retweet if you have come this far. Am not shameful about it.

The BOTTOM LINE is that FPIs can happily sell a another $30-40bn in India and it won’t move the needle much on their exposure to India

In April, India was only the 2nd Worst Market in Asia for FPI Outflows. But those outflows increased in May