Archive · 30 Jul 2026
FPI Inflows Mask Uneven Market Gains, Says Analyst
Foreign investors mostly buy big companies in India, so small and medium companies still rely on local investors.
The small and medium companies are priced high, needing a lot of earnings growth to stay fair.
The big market index, called the Nifty, is also priced high compared to how fast it earns money.
Banks are cheaper than before, but they are not growing as fast as they used to.
The analyst says people should look at how much money companies actually make and how good their future looks, instead of just following what foreign investors are buying.
FPIs mainly invest in large‑cap stocks, leaving mid‑ and small‑caps dependent on domestic flows.
Mid‑ and small‑cap indices trade at P/E multiples in the mid‑30s, requiring 20‑25% earnings growth in FY27 to justify valuations.
The Nifty trades at ~20× earnings with FY25 EPS growth of ~5%, giving a PEG ratio of ~4, above the normal 1‑1.5 range.
Banking stocks are undervalued relative to history, but earnings growth has slowed to 4‑6%, aligning valuations with global peers.
Aggarwal advises investors to focus on fundamentals, earnings revisions, and sector‑specific prospects rather than chasing headline FPI flows.
- Who
- Aggarwal, market analyst
- What
- Analysis of FPI inflows and valuation dynamics in Indian equities
- When
- 2025
- Where
- Indian equity market
- Why
- To explain that FPI inflows do not guarantee gains across all market segments and to advise investors to focus on fundamentals
- FPI Focus
- Large‑cap stocks
- Mid/Small‑Cap P/E
- mid‑30s
- Nifty P/E
- ≈20×
- PEG Ratio
- ≈4
- Banking Sector Valuation
- below historical averages
- Banking Earnings Growth
- 4‑6%
- RBI Rate Cut Outlook
- improved expectations