Long-term vs short-term views: Why Indian markets remain a strong bet for investors
foreign institutional investors (FIIs) have been net sellers, offloading about $23 billion from October 2024 to January 2025. The prevailing narrative attributes this to a weakening Indian economy. However, a closer examination reveals a more nuanced reality.
The narrative: A weak Indian economy?
The dominant narrative suggests that a weak Indian economy is driving FIIs to sell. This view is supported by India’s GDP growth for Q2 FY25, which was 5.4%, below the typical 6%-8% range. Overall earnings growth for Indian companies was around 4% year-on-year. However, excluding metals and oil & gas, earnings growth was in double digits. High inflation has seemingly weakened Indian consumer purchasing power, reflected in the slow growth of several FMCG companies. Additionally, the depreciation of the INR against the USD has compounded concerns. However, a deeper look at the data suggests a different reality.
Comparative economic analysis — the top 10 economies where FIIs can allocate
India remains the world’s fifth-largest economy, with high likelihood of surpassing Japan and Germany by 2027. Comparing India’s economic performance with the other top 10 largest economies provides a perspective which the FIIs have to use when comparing the global asset allocations. In 2024, the US had a real GDP growth of 2.8% and inflation at 2.9%. Germany and Japan both faced a slight contraction of 0.2% in GDP, with inflation at 2.4% and 2.6%, respectively. Most other large economies, such as the UK, Italy, France etc. ranged between
Read more on economictimes.indiatimes.com
