Stories
When Will Foreign Investors Return to India? Bernstein Weighs In on Market Outlook.
- •Bernstein predicts no acceleration in FII investment in India over the next 12 months, though the decline may halt.
- •Foreign investors no longer see the same potential in the Indian market, possibly focusing on trading rather than long-term investment.
- •Large-cap Indian companies are not investing enough in future technologies, posing a growth challenge.
- •Small and mid-cap stocks face challenges for large foreign investors due to low trade volume and limited free-float.
- •India needs to boost sectors like semiconductor manufacturing and battery storage to attract foreign investment.
Key Questions Answered
According to global brokerage firm Bernstein, FII investment is not expected to accelerate significantly over the next 12 months. However, while long-term investments may remain subdued as investors no longer see the same potential as before, foreign investors might still return periodically for short-term trading of Indian stocks.
Bernstein reports that large Indian companies are not investing sufficiently in future technology and businesses, while focusing instead on strengthening older operations. Furthermore, India has yet to solidify its global standing in emerging growth sectors like semiconductors, electric vehicles, and solar energy due to this lack of adequate capital expenditure.
When foreign investors turn to small-cap and mid-cap companies for growth, they encounter several obstacles including small company size, low share trade volumes, limited free-floats, and a lack of sufficient analyst attention. These factors make it difficult for large foreign investors to deploy significant amounts of capital safely.
