While domestic mutual funds have absorbed much of the foreign investor outflows, institutional leaders at the Global Fintech Fest stressed that FIIs/FPIs remain essential for India to achieve its $10 trillion market-cap ambition.
Foreign portfolio investors hold roughly a third of India’s actual free-float stock and are critical to doubling market capitalisation from $5 trillion to more than $10 trillion, said Arun Kohli, Managing Director and Head of India at Morgan Stanley.
“The Indian market has a total market cap of $5 trillion, but more than half is owned by promoters, which is not really liquid. If you think about the liquid stock, foreign investors own one-third of it and are very important providers of liquidity.”
Kohli added that FIIs and DIIs should not be seen as opposing forces that simply offset each other; they are complementary.
“If we go from 5 to 10-plus [trillion], we will need a lot of fresh capital,” he said.