)
Foreign investors have been betting big on Indian equities since 2014, on hopes of a BJP-led NDA government coming to power. The overweight position (compared to the MSCI India weightage) hit an all-time high of 400 basis points in the December quarter. Listed India-focused funds saw "record" inflows of $1.7 billion in January, while most other emerging markets saw redemptions to the tune of $3 billion.
At present, FIIs own 56% of MSCI India stocks that are available to them for investment after regulatory caps.
Foreign institutional investors continue to be overweight on Indian equities, by a record 400 basis points compared to India's weight in the MSCI benchmark (emerging market). However, this was starting to become a source of concern to some market participants as the market was stepping into overbought territory.
Foreign institutional investors continue to be overweight on Indian equities, by a record 400 basis points compared to India's weight in the MSCI benchmark (emerging market). However, this was starting to become a source of concern to some market participants as the market was stepping into overbought territory.
But one of the things Budget 2015 has done is to address this issue.
Jyotivardhan Jaipuria, head of research at Bank of America Merrill Lynch, says: "We have been a bit worried of the huge overweight position of GEM funds in India. With the Budget indicating the FII and FDI caps would be made fungible, we expect banks like Axis, Yes Bank, IndusInd and Kotak to be included in the MSCI again. This will raise the MSCI weight of India from 7.6% to 8.4%, reducing the overweight."
