The Neatest Little Guide to Stock Market Investing, 2010 EditionWhenever one has talked of emerging markets in recent times, China has always found a mention ahead of India. However, today's chart of the day has thrown up a rather surprising result. India has performed way better than China as far as the year to date returns from stock markets are concerned. In fact, India has trumped not just China but all of its BRIC counterparts. It is the only country where stocks have given positive returns so far this year.
Blame it on the FIIs. As per a leading daily, overseas funds have poured in a record US$ 12.4 bn into Indian equities in the first eight months of 2010. And they seem to be in no mood to slow down. Total inflows could rise to as much as US$ 16 bn by the year-end. Surprisingly though, domestic institutions do not seem to be so gung-ho about Indian equities. Their investment during the same period has amounted to just 5% of the money put in by FIIs. What more, they have turned out be net sellers in the past three months.
The Only Investment Guide You'll Ever NeedThis then presents the biggest dilemma for a retail investor. Should he listen to the FIIs or side with the domestic institutions? We believe that both the FIIs and domestic institutions have their own sets of reasons for doing whatever they are doing. And so should an individual investor. According to us, there is just one way in which long term wealth in equities can be created. And it is to invest in companies that have a long track record of generating far more cash than they can consume internally. Buy into such companies at reasonable valuations and you can forever ignore what FIIs or other institutional investors are doing.
NOTE: This is from Equitymaster's 5 minutes wrap-up.
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