Global factors driving funds flows into Indian markets: Himanshu Srivastava, Morningstar

We might have to wait for some more time for the long-term trend in flows to emerge. At this point of time, the going is good but we need to be cautious and see where this trend is headed, said Himanshu Srivastava, Senior Analyst, Manager Research, Morningstar Advisers India, in an interview with ETNOW.

Edited excerpts:

This has been a reversal of trend as far as the FII flows are concerned. They have turned out to be significant buyers in the market. What has changed?

It is definitely a very sharp change in trend which we would not have expected sitting in January. We will see such huge flows from FIIs into the Indian markets. The situation was different than what we have seen and what we are seeing now. It is largely because of global factors that we are seeing so much of inflows into the Indian markets.


There has been a change in the monetary policy stance by various central banks across the globe -- be it the US Fed or China or European Central Bank. All the central banks have actually paused their rate hike cycle which has actually improved the liquidity in global markets. That is why we are seeing flows into emerging markets like India.

Also on the domestic front, we have seen alleviation of some of the concerns that was plaguing the markets initially and there have been improvement so that investors are expecting a better macroeconomic outlook for the country as well as the formation of a stable government.

All in all, it is a mix of global as well as domestic factors but I would like to say that it is largely the global factors which are driving flows into the Indian markets at this point in time.

March has been one of the best months that you have seen when it comes to the FII flows which is also being mirrored on the mint. What should be the top picks?

FII movement or the flows that we have seen from FIIs will keep varying. So, there will be sharp declines and sharp movements that we have seen in the past.

From an investor perspective, that should not be the criteria for investing into the Indian equity markets. Asset allocation is one of the major things that they should focus on.

We are witnessing elections and a lot of times, we are getting query as to what they should do in such a scenario where FIIs are again back in the Indian markets, DII are redeeming their investments and elections are near.

The focus should be on long-term investing if you are investing in equities. Have a right asset allocation pattern, have a good mix of asset allocation which represents the investor’s risk taking ability and invest for a long term. These things are short term in nature, they keep on happening but at the same time, if you have a long-term portfolio, these things will not really impact.

SIPs are one of the best ways to tackle volatile situations that we are seeing in recent times. Sticking to the fundamentals of investing is the right approach in these market conditions.

Since you mentioned about long-term investment, with significant amount of FII inflow making way into the Indian markets, would this trend sustain over a longer period of time? Are there enough triggers in place to help sustain this trend?

It is very difficult to predict at this point in time or at this stage whether this trend will continue or not. We need to look into the factors that these flows are largely driven by global factors. It is not only India which is benefitting from it. Other emerging markets are also seeing similar trends.

Plus, we have not seen too much of improvement from the flows perspective and India focus funds space which is considered to be long term in nature. We are very close to the election and so far, foreign investors have sidelined domestic concerns and are focussing on global trends.

That is where they are investing but given that we are so close to the elections, domestic factors will take over and if there are some surprises in the elections or on the macro front, then that could be counterproductive.

We might have to wait for some more time for the long-term trend to emerge. At this point of time, the going is good but we need to be cautious and see where this trend is headed.