Indian Stock Market to Grow Despite FIIs Withdrawing

The Indian stock market has been in jitters for some time. In the last 6 months, FIIs have withdrawn huge amounts of money from the Indian market. In the last 1.5 months alone, FIIs have withdrawn about ₹1 lakh crores from Indian markets. Despite this, the market has gone by about 15% and 6% only in the last six months and 1.5 months respectively.

What does it mean for Indian markets?

This simply means that Indian markets, though still being affected by the FII investments are not as dominated as were previously! The young investors in India are on the scene. They have invested about ₹2 lakh crores in markets in the last 6 months. Rather than leaving the market, they are investing, unlike the earlier trends!

This shows the confidence and optimism of young investors in Indian markets and the Indian economy. This confidence will change the attitude of FIIs. Also, the new Trump Administration in the USA would become more predictable. These together will attract back the FIIs to India.

As the number of young workers in the active workforce in India is increasing, the number of investors in the stock market is also increasing. This is changing the dynamics of the Indian stock market. What is important in this trend is that, unlike the previous generations, this generation does not have a natural negative bias towards the stock market. Rather they are considering investing in the stock market as an opportunity and effective way of increasing their wealth in the long term. This is coupled with more buying when the stock market is down! They are buying more either through directly in the stock market or mutual funds than withdrawing during crashes!

These behaviours of Indian investors are deepening the stock market in India with increased retail investors' participation. Though, investing in the stock market is a risky business, still Indians are ready to take the risk! Why? Because they feel and are confident that they are putting their hard money in the right investment vehicle. This will change everything in future making India a more attractive place to invest.

The market is expected to recover soon as the government is doing the right thing to increase demand in the economy which was decreasing leading to a fall in GDP growth rates quarter after quarter. Reserve Bank of India (RBI) has decreased the repo rate by 25 basis points which would lead to a cut in EMI expenditure by a household which eventually will result in more disposable income in the hands of consumers. Also, the government has changed to a new income tax regime making ₹12.75 lakhs tax-free from the next fiscal year. This will also increase the disposable income of consumers leading to higher demand in the next fiscal year than the current year. Also, the Budget 2025-26 would boost investment in infrastructure than the current year. This will also have a positive impact on the demand side.

So the coming year will be more happening and positive for the Indian economy.

Rajeev K Upadhyay