Fii and Markets sentiments

Yes, I agree that FII's trend affects the market sentiment a lot. Most of the specualtors and traders sentiments who are the major players after the FII's and DII's gets affected by the FII's mood in the market. If the FII is on a buying spree no matter what the fundamnetals are they would start buying and vice versa on the opposite position.

Yes, India currently have heavy foreign exposure in it’s balance sheet and the Indian market have always moved in tandem. They have been fueling the peaks and  with domestic institutional investors, pension funds are staying away from stocks.

But overdependence on FII is not good, especially for a developing nation as we will be highly exposed to global risks and heavy selling off can seriously affect the economic balance. In the long run we should opt for more foreign exposure in the P/L.

When an huge investment comes into the markets, technicals would go awry. Thats why FII investments or sellings effect the market very much.

If the corporate performance is good, the FIs and mutual funds start investments positively. During this, FII selling may be nullified due to the potential of the corporate due to the prevailing sentiment and the above arguement may go wrong.