Investors are constantly shifting on this judgement – are domestic and global equity markets coupled or decoupled? FII flows tend to swing wildly and frequently, and they keep testing the prevailing hypothesis.

When we think we are coupled, global fund flows into India spring a surprise on us. While global markets trend down, those very global flows tend to prop up our markets. The current counter trends to global sentiment clearly indicate a FOMO factor among FIIs. They seem to be gripped by the fear of missing out on an election rally.

On the contrary, domestic investors are praying for a pullback in what they own. They would like to recover the notional losses in their portfolios. The interesting thing to watch out for is how much of the FII flows are moving into midcap and small caps which were once the toast of the markets before they crashed. If FII flows move into newer parts of the market, as trends indicate, the FOMO factor will begin to grip domestic investors in a very different way. They will become desperate to own what is moving the markets.

Clearly, the market leadership seems to be shifting due to the election trade and foreign investors seem to be more clued in than domestic investors.

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