- Ace investor Samir Arora of Helios Capital has urged Indian investors to shift their focus from PE (private equity) flows to FII (foreign institutional investors) flows.
- Arora argues that the current PE flows into India, which average around US$ 25 billion per year, will become unsustainable over time.
- He suggests that FII flows, which average around US$ 20 billion per year, are a more stable and sustainable investment strategy.
Samir Arora, a renowned investor, advocates for a shift in investment focus from private equity to foreign institutional investors in India, arguing for the sustainability and stability of the latter.
Arora’s Argument Against PE Flows
Arora’s argument against PE flows is based on the premise that they will become unsustainable over time. He suggests that the current PE flows into India, which average around US$ 25 billion per year, will eventually need to be replaced by new flows. This replacement, he argues, will need to be significantly larger to account for the outflows and additional inflow, leading to an unsustainable cycle.
The Case for FII Flows
On the other hand, Arora argues that FII flows, which average around US$ 20 billion per year, are a more stable and sustainable investment strategy. Unlike PE flows, FII flows do not have a fixed tenure and can be more easily managed in response to market fluctuations. Arora suggests that with similar returns to PE flows, FII flows are less likely to be redeemed, making them a more reliable investment.
Recent Trends in Foreign Investment
Recent data from the National Securities Depository Ltd (NSDL) shows that foreign investors sold Indian equities worth more than ₹8,600 crore in April and ₹18,375 crore in May. The share of foreign institutional investors (FIIs) in NSE-listed companies also fell to an 11-year low of 17.68 percent at the end of the March quarter. These trends suggest a shift in foreign investment patterns, potentially supporting Arora’s argument for a greater focus on FII flows.
Conclusion
Arora’s argument for a shift in investment focus from PE to FII flows presents a compelling case for the sustainability and stability of the latter. With recent trends in foreign investment supporting this argument, it may be time for Indian investors to reconsider their investment strategies.
