In the modern era of the stock exchange and other trading markets, investors and traders have bloomed both from the national and international sectors. Certain foreign investors show interest or rather invest in international markets on the assets of those particular countries where they want to trade.
These investors are known as Foreign Institutional Investors (FII), and this term is commonly used in the Indian and Chinese markets. The FII contains various sectors like hedge funds, mutual funds, investment banks, and pension funds. FIIs are the most crucial factor for the development and progress of the Indian economy. The profit margins of the stocks and shares are measured based on a global index.
In the following article, we will discuss the factors that cause the outflows and inflows of the FIIs in the Indian Markets and also shed light on FII DII data analysis.
Causes for the FII Outflows
FII outflows in a country are generally caused by various international and domestic factors like geopolitical tensions, domestic FII DII trading activities, and various government policies in the domestic trading sectors. Here the factors for the FII outflows will be discussed:
International Economic Factors
Global economic instability or any kind of international political stability has an important impact on the FII flows. The global economic data sometimes interprets that whenever there is an economic recession then the investors pull out the investments and start investing in a safer market. The sudden outflow of the FII is mainly caused by geopolitical events or economic tangles.
Domestic Economic Factors
The crisis of several Non-Performing Assets, high inflation rates and lagging economic growths show a major impact on the outflows of the FIIs. The NPA crisis had reduced the bank credits for trading shares and stocks, and the high inflation rates on the global scale had reduced the investments from foreign investors.
Information about Policies
The Indian government has introduced various policies which sometimes do not favour the FII flows in Indian FII&DII market activities. The Capital Tax Act reduced the inflows of the FIIs in the Indian market. As per the FII DII data analysis, the Foreign Direct Investments had decreased the FII inflows in the e-commerce markets.
The Indian market has seen certain FII inflows due to certain factors which will be discussed shortly.
Causes for FII Inflows
The FII inflows in the Indian Market have been attributed to several factors on the grounds of domestic economic sector progressions in the past few years. The factors are as follows:
High Economic Growth
The high GDP rate of India had significantly impacted the FII inflows as this had attracted foreign investors to invest more domestic assets in the various public and private sectors. The high GDP rate increased the rate of revenue generation for domestic trade. This has increased the profit margins of the micro and macro finances and uplifted share markets at a sustainable rate.
Business Development
The foreign investors and traders have been attracted by the impressive market performances of India. These investors have shown huge interest in investing in Indian capital assets. Hence, gradually with the investment the FII DII data has shown a high rate of increase in the number of shares.
The benchmark performances of the domestic market had made India the largest and highest-performing market in the global Accenture.
Rules and Regulations
The introduction of various investor-friendly policies favoured the inflows of the FII&DII in domestic ventures. The GST or Goods Service Tax has made India a hub and destination for foreign investors to invest in various domestic capital assets. The tax-paying systems in India have attracted investors to invest in certain platforms to perform trading well.
Final Thoughts
The FII inflows and outflows play a major role in trading activities and help in creating immense revenue generation domestically. These FII flows will also increase the GDP rate of India and make India one of the fastest-growing economies in the international markets.