American Fed reduced interest rates, but why are foreign investors making distance from the Indian market?

New Delhi: There has been a news from America which affects the stock markets of the whole world. The US Federal Reserve (Central Bank) has cut interest rates by 0.25%. In simple language, it has become a little cheaper to borrow money in America.

Usually, whenever this happens, there is an atmosphere of celebration for developing countries like India. Foreign investors, who are always looking for more profits, withdraw their money from America and invest in markets like India. But this time there is a big twist in the story. The biggest experts of the market are assuming that despite this decision of Fed, foreign investors will not show any special quickly to invest money in India.

Then where is the problem?

Think, everything looks good, yet why are foreign investors shying away from coming to India? There are some major and solid reasons behind this:

1. Indian market more expensive: The biggest reason is the expensive Indian stock market. In the recent past, our market has gained such a boom that shares of many good companies have reached more than their real price. Foreign investors feel that shopping at this expensive price may be a loss deal.
2. China and other Asian markets are cheap: Foreign investors always see ‘Value for Money’. At present, the stock markets of China and some other Asian countries are getting much cheaper than India. In such a situation, investors are feeling that it is better to invest in cheap markets like China where more profit is expected to get more profit.
3. Fear of profit recovery: Foreign investors have already invested heavy in the Indian market this year. Now that the market is at its peak, they fear that it may be difficult to go up from here. Therefore, instead of investing new money, many old investors can consider getting out by selling their profits.

In short, the US may have opened a way to the world, but India’s expensive market is currently working as a ‘speed breaker’ for foreign investors. Until the market is a bit cheaper and attractive, it is too early to expect a heavy flow of foreign money.