Foreign institutional investors (FIIs) will be back in full force or they will stop selling in India because their selling is not directly related to the Indian market and it has more to do with US rate hikes, said Samir Arora, Founder, Helios Capital, in an interview with ET Now.
Arora added that additional money in the form of endowments and sovereign funds also triggers an inflow of money into emerging markets like India.
"Plus, minus six months, the FIIs will be back in full force or in some force or at least they will stop selling simply because of the default situation for the FIIs to buy in India and other markets because every year there are these endowments and the sovereign funds and everybody gets additional money whether it is pension fund money or whatever money they are managing.
"We do not feel this year’s selling is directly related to something that the Indian system has done to them and therefore they are deeply upset with us. It seems more to do with US rate hikes and the fact that emerging market baskets or some Asian baskets are not doing well. The portfolio NAVs got hit or they took profit here but the default situation in general for all these guys is to buy," Arora told ET Now.
Arora said banks and some tech stocks will benefit when foreign fund inflow begins. "In some sense, the stocks that they normally like, should get benefit because right now those are the stocks under pressure. It is mostly the banks and also a little bit of tech," he said.
Arora said he has trimmed the cash holding and invested in equities as sentiment has improved in the last one month.
"We had about 12% cash now I think we have 4-5% cash there and in my long-short fund, now we are about 65% net, which is higher than our 17-year monthly average of around 62%," said Arora.
"At the beginning of the year, maybe in February-March, we had got down to around 40% something net in our long-short fund and even in the long-only fund we had around 15% odd cash. Clearly, there is a change not only in the sentiment but actual portfolio since the end of June," he added.
Arora said in his long-only fund in India, he has bought 15% in IT and 85% has gone into financials and consumers.
"If you look at the long-only fund in India, we have basically bought 15% in IT and 85% has gone into financials and consumer. Our top three holdings are all banks and that is the safest because it never got rerated a lot and it is very good in itself and it has taken the brunt of the FII selling.
Disclaimer: This article is based on an ET Now interview. The views and recommendations made above are those of the analyst and not of MintGenie.