FII selling to keep markets nervous; infrastructure best medium-term bet right now: Sunil Subramaniam

India's equity markets are caught in a three-way tug of war, and for now, no side is winning decisively. That is the central message from Sunil Subramaniam, a widely followed market strategist, in a candid assessment of where Indian stocks go from here.

Speaking on ET Now, Subramaniam laid out a simple framework. Foreign institutional investors (FIIs) remain nervous about elevated crude oil prices and their knock-on effects on inflation, the fiscal deficit, and corporate earnings. Retail investors, on the other hand, have largely concluded that the worst is behind them — a conviction reflected in the sharp outperformance of small-cap and mid-cap stocks through April. DIIs sit somewhere in between, doing careful sector-by-sector number crunching and rotating selectively.

It is going to be a very nervous, consolidating market — with a slightly negative bias because of the FII overhang. But as soon as the war ends, you will see a real big pick-up.

-Sunil Subramaniam, market strategist

The practical implication: DIIs will step in on sharp down days to prevent a major crash, but the index is unlikely to make significant new highs until FIIs stop selling — and eventually start buying again.

Infrastructure: the medium-term bright spot

Away from the near-term noise, Subramaniam was notably bullish on infrastructure as a multi-year investment theme. He cited five distinct drivers: government capital expenditure, rising capacity utilisation in the auto sector, EV-related capex, the early stages of a private sector investment cycle, and the surge in data centre construction.

Trade deals in the pipeline add another layer. Every agreement India signs ultimately requires new manufacturing facilities, logistics networks, and export infrastructure, much of it yet to be built. "Infra is not yet in a stage where it has been fully discovered," he said, calling it one of the best places to deploy capital on a medium-term horizon.

Market bias

Consolidating, slight negative

FII stance

Cautious, still selling

DII stance

Selective, sector-rotating

Top medium-term bet

Infrastructure

BJP's state wins: a positive, but not a market mover

On the BJP's electoral wins in West Bengal, Subramaniam was measured. He acknowledged the economic significance; Bengal in particular has long suffered from industrialisation that never came, but said the market had far bigger things on its mind: earnings season, the ongoing war, and persistent FII outflows. "The market itself today has far greater things on its mind," he said. "To expect it to jump 1,000 points is unfair."

The wins, he added, do reinforce policy continuity and reduce friction between the centre and state governments — both positives for long-term economic momentum, if not immediate catalysts.