“The Chinese stock market responded positively, with the Hang Seng index surging by 18.7% in a month, in sharp contrast to the 1.55% decline in the Nifty. Since Chinese stocks remain cheap, this ‘Sell India, Buy China’ trade may continue,” added Vijayakumar.
Vaibhav Porwal, Co-Founder of Dezerv, highlighted that since October 2024, India’s market capitalization has fallen by approximately $1 trillion, while China’s has risen by $2 trillion, indicating a tactical shift in FII flows. India’s premium valuation relative to peers like Indonesia, South Korea, and Taiwan has been a headwind.
Porwal believes that FII flows could return to India in the next 3–6 months, as the economy and macro factors in the long term remain favorable. “Strong domestic demand, digital transformation, and infrastructure push are long-term drivers likely to bolster corporate earnings and sustain growth,” he said.
Emkay Institutional Equities expects FPI selling to subside by the second quarter of 2025. Emkay stated, “Despite persistent selling pressures, FPI activity is likely to stabilize post-1QCY25, with valuations having moderated and earnings forecasts bottoming out over the next 2-3m. A peak in the U.S. Dollar Index (DXY) should also ease rupee depreciation concerns and help stem FPI selling.”
