Why FIIs Are Staying Away From India Despite Strong Fundamentals | India Vs China, Korea & Taiwan

Añadido: 2026-06-01

[00:00:00]We bring on board Jeff Dennis, independent independent emerging markets commentator, joining us from New York.

[00:00:06]Very good evening, Jeff. It's It's late at night. You know, respect the fact that you've come out and and are are giving are giving us this short chat. But give us a sense. This US Iran deal of sorts. How likely? Because it just seems like uh uh it's not It's very unlikely to come through. At least that's really the sense that we sitting out of uh out of Asia seem to be getting. And what's the second order impact if at all this could continue to get extended?

[00:00:37]What's your sense?

[00:00:40]>> Well, I think it's fair to say my head is spinning on all the different views that you hear from Trump and from Iran and everybody else. I'm sure yours are as well, and the markets certainly are.

[00:00:51]We get these continuous conflicting headlines. One day it looks good, the next day it doesn't look so good. And frankly, nobody knows, and I don't know, and until there's really any good real sign of a proper ceasefire, which leads to some progress towards opening the Strait of Hormuz, I think we are going to continue to be in this sort of limbo with respect to with respect to the Iran war and how it all plays itself out. It's just incredibly uncertain. And my best bet, and I'm not a geopolitical analyst, but my best bet is going to can probably continue to for a while.

[00:01:31]Still, we all know that Iran doesn't want to give up its nuclear ambitions, and we know that Trump wants those to to disappear. Um the knock-on effect is interesting to me, because as you mentioned earlier, the price of oil is now Brent is now at 93, basically. It spent a long time between 100 and 120.

[00:01:53]It's broken out of the trading range to uh the lower end.

[00:01:57]and uh this is despite lots of forecasts from around the world of people saying if the Strait of Hormuz uh stays closed for a long period of time, it's going to go to 150, 180, 200 dollars a barrel.

[00:02:10]And so, although this war is sort of in limbo, and we haven't got any sort of significant move towards a true conclusion, the oil price is now helping to support global markets because it's a lot lower than people thought it would would be at this stage, and it's broken out of the lower end of its trading range.

[00:02:32]>> Morning, Jeff. Uh so, how should an investor look at this entire uh geopolitical uh you know, statements which are coming from from not just Trump, but also from Iran, and position its portfolio?

[00:02:46]>> I I I'm I'm worried about this um over the next 2 to 3 months. I'm I'm I'm not negative, but I'm worried about it because I think that um the it is entirely possible that a couple of things could happen. First of all, we know that one of the reasons or two of the reasons why the price of oil is down is was the US is supplying more now, and secondly, global demand has fallen. And so, particularly in China, and so, what you're getting here is you're getting some sort of supply demand response, which is reducing the impact of 20 million barrels a day, which is stuck um because the Strait of Hormuz is is is closed. Now, I think at some point that that sort of benefit is probably going to slow down, maybe subside. Um and so, I think there's always an ongoing danger that oil prices will go back up again, um particularly if, of course, we get a renewal of the bombing, um and therefore, quote unquote, the war. Now, on the on the actual side of the markets themselves, leaving Iran um the Iran Iran war out of it right now.

[00:03:55]We're sitting in a situation where markets are very, very expensive, not so much in EM, of course, compared to say the US.

[00:04:02]We've got Korea in a clear bubble of sorts. We've got Taiwan in something of a bubble as well. And we have now a significant risk that US interest rates have bottomed out for the year, and they will have to go up because inflation's high. So, I think there are some warning signs. I wouldn't be a major seller here, but I'm just a little bit less optimistic than I was a few weeks ago.

[00:04:26]EM is up 26% now in dollars, which is an astonishing performance given what's going on, and I think we've got to be a little bit careful about the asset class overall, and indeed equities overall in this situation given what I've just said.

[00:04:43]>> Well, I mean, while EM is up 26%, India has done relatively poorly in in comparison. Give us a sense what's playing against India, and and what could likely tilt the flows towards India now?

[00:04:57]>> Well, one one thing I got wrong is I assumed that once China deteriorated, which it's done this year, India would get some of that money, and that hasn't been the case. So, that's one thing, and obviously virtually all the money in Asia has gone towards Korea and Taiwan for obvious reasons given their stack, sorry, their tech exposure. Now, I think the issue with India as far as I'm concerned is there is just no foreign interest in the market right now. FII flows have been negative, they're poor.

[00:05:29]And I think this is because India is really caught in a bit of a trap because of the high price of oil.

[00:05:36]Obviously, as you know well, India basically imports all of its oil. It's going to put some upward pressure on inflation, and possibly potentially could, if the economy's is a little weaker could lead to a wider budget deficit and it's not clear what the scope will be in this sort of environment for the RBI to reduce interest rates. So we need a trigger in India to for the market to move higher and I think that's going to have to come from foreign investors. A weaker dollar would help here because the rupee has been weak although it's rallied the last two or three days or so. I would much rather be in India than China or even Korea and Taiwan on a 12-month basis but when that turning point will be doesn't depend on me. It will depend on when foreign investors decide that this is a good time to go in because the impact of the higher oil prices has begun to be fully discounted by Indian investors.

[00:06:34]>> Mhm. Uh Jeff, if that's the scenario building up, do you think once this entire crisis gets over and and you think it's two to three months away, we going to see some flows back to India?

[00:06:51]>> I would think so. I think having said earlier that there's a risk oil prices go higher again because we've got to see the Iran US Iran war settle down and there's still a lot of oil that's been held out of the market. So you could still get another spike in oil price which would hurt India. But on the assumption we get some sort of settlement eventually oil prices will possibly drift a little bit lower. That will that will help India. I I actually think the truly weak performance in India this year is a little bit puzzling notwithstanding the price of oil and notwithstanding the pressure that's putting on the budget, the RBI etc. The fact there's very little technology of any significance in the market. But I think given how frothy Taiwan and Korea, especially Korea look right now, that could easily bring some money back towards India eventually, but timing that is just so so hard cuz you got to time when the US Nasdaq index peaks, when AI peaks in the US, when Korea peaks, and also you've got to time what's going on as far as the Iran-Iraq the Iran, I'm sorry, US war is concerned. And frankly, as I said at the beginning of my my presentation here, my head's spinning. We get different headlines every day. I pretty much ignore them. Nothing is happening to fundamentally resolve this war, apparently, and so the risk of, you know, war beginning again is still there, and that would push oil prices up, and I think that's handicapping India in the short term.

[00:08:27]>> All right. Thank you so much, Jeff, for coming in and speaking to us. Surely handicapping India in the short term.

[00:08:34]Great context this Monday morning, at least for our viewers. Have a great rest of the weekend.