India handled twin global shocks without major FII outflows, bullish on FIIs returning: Samir Arora

FIIs have been net sellers in India so far this year, pulling out $15,074 million even as China, Japan and Taiwan emerged as their preferred destinations to ride the global AI trade. But Samir Arora, founder of Helios Capital, believes India has weathered global shocks better than its regional or emerging market peers, and the next leg of flows will depend on domestic triggers such as consumer revival from GST rationalisation and a stronger showing from financials once rate cuts kick in.

“From February-end, flows were still okay. We saw negative flows in January and February, but that was before this trend started at that time, people still preferred the US, thinking the tariff issue wouldn’t escalate. But in the last 2-3 months, two negative events hit India: the surprise 25 percent additional tariff, materially harsher than what others faced, and now this new H1-B issue. Still, if you look at FII flows in aggregate since February-end, I would say they are around plus-minus zero. We have managed to absorb two India-specific negatives better than our regional or EM peers. I remain okay with the view that FIIs will invest,” Arora told Moneycontrol.

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Globally, US equities remain dominant, accounting for about 65 percent of the world index. Yet, for the first time in years, ex-US markets are outperforming in dollar terms. While the US has gained 16-17 percent year-to-date, the MSCI World ex-US index has surged nearly 25 percent.

Arora said the shift is visible on the ground as well. “When I was in the US two weeks ago, I could see this sentiment clearly. Even on financial channels, you hear it regularly, there are small flows, 2-5 percent, moving outside the US. You see this in MSCI World ex-US ETFs, in EM flows, and EM funds. India also had a claim on these flows, maybe a little less, maybe a little more.”

But India hasn’t captured the lion’s share of these allocations. According to Arora, investors have channelled large sums into Korea and Taiwan, markets seen as proxies to play the global AI boom. “If US investors are buying US tech, those who can’t because of mandates go to Korea and Taiwan,” he explained.

That leaves India at an inflection point. Having absorbed twin shocks of tariffs and visa restrictions, the country’s ability to revive consumption and capitalise on domestic reforms will determine whether FIIs return in strength in the coming months.

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