India Inc. set for another Strong Rebound?
Updated: Mar 25, 2025
A recent White Oak report caught my attention because it tells a similar story from NSE India Ownership Report (Dec 2024): while FIIs have been selling, domestic investors are capitalizing on the opportunity.
Over the past six months, the market has faced significant FII outflows, touching nearly $24.2 billion—one of the highest in absolute terms. However, a closer look reveals that the outflows as a percentage of market capitalization remain relatively contained (just 0.6%), it’s clear that the structural growth story remains intact. In fact, past market cycles show that similar downturns—such as the Global Financial Crisis (-66% BSE 500 drop, followed by +127% rebound) and COVID-led sell-off (-37%, followed by +98%)—set the stage for high returns.
Foreign investors tend to seek times of distress to identify the best opportunities. India, having witnessed one of its sharpest market corrections in recent times, now presents itself as a perfect place for foreign institutional investors (FIIs) looking for high-growth possibilities at reasonable valuations. India, having seen a sharp 18.9% market correction from its all-time highs, now presents a good opportunity for FIIs to return before the next growth upsurge.
FIIs have lower holdings, but domestic investors are purchasing aggressively. Will overseas investors follow before the rally?
While there has been turbulence, macroeconomic fundamentals in India are strong. The Sensex, which had a steep fall from its high, is now bottoming out. The P/E ratio of 18.1x currently indicates a re-entry point that most global funds will not like to miss.
This inflow of DII business is supported by robust domestic liquidity, with SIP flows exceeding ₹18,000 crore every month, providing a consistent flow of capital. In contrast to FIIs, who tend to respond to international macroeconomic conditions, DIIs have a long-term approach with India's strong GDP growth, stable corporate profits, and encouraging sectoral tailwinds in banking, infrastructure, and manufacturing.
The 18.9% recent market correction has now improved valuations, and the present P/E ratio of 18.1x represents a strong re-entry point. DIIs perceive this as a chance to buy quality stocks at cheaper prices before the next growth cycle sets in.
As the cycles have taught us, it is generally those who are investing in the time of uncertainty who end up being rewarded most when stability arrives. Are we at the doorstep of yet another rebound?
FIIs have been net sellers on account of global reasons such as increasing US bond yields, a strong dollar, and risk-off sentiment, and not because of any India-specific issues. DIIs are aware of this as short-term noise, being aware that fundamentals of India are still robust. With the government's investment initiatives, such as Make in India, banking sector reforms, and infrastructure development, the market is poised for long-term growth.
The Indian market has moved in a pattern as expected—sharp corrections followed by high-growth recoveries. With valuations coming back to normal, corporate earnings improving, and GDP growth leading the world, the only question is no longer if the market will recover, but when?.
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