flows
Flows import a cycle
The rule
Foreign money arrives and leaves in herds, importing a cycle India did not cause - read the positioning, never as a timing signal.
Where it flips
Heavy foreign selling feels like a verdict on India. Where it misleads: you read imported flows as a judgement on local fundamentals, or as a signal to trade. The fix: treat foreign flows as a description of who is moving prices and why, and separate the imported cause from the domestic story.
FII and FPI flows are driven partly by events far away - US yields, the dollar, global risk appetite. When they surge in they amplify a rally; when they rush out they deepen a fall, whatever India's own economy is doing. The reader reads foreign positioning descriptively, to understand who is pushing prices, not as a buy or sell signal.
A worked example
US yields rise and the dollar strengthens, so FIIs sell Indian shares in size for reasons that have nothing to do with Indian earnings. Domestic SIP flows cushion part of it, but the imported selling still moves prices. [illustrative]
How to spot it
- ·FII selling driven by US yields or the dollar
- ·flows moving in herds, both ways
- ·domestic flows partly offsetting foreign ones
- ·foreign positioning read as description, not a signal
Foreign-flow reading · FII/FPI flows and the imported cycle