“Nirmala Tai”

Nirmala Tai – I could have simply said “Finance Minister,” but I choose “Nirmala Tai” because that is how many common Indian’s emotionally connect with leaders — with trust, respect, and hope. The title reflects the mindset of ordinary people who believe the government is working for the nation’s future.

“We (“Indian retail investors”) have so much emotion that with love, traders even gave the budget-day volatility candle the name ‘Nirmala Candle’.”
{Reference: Union Budget 2024 was presented by Finance Minister Nirmala Sitharaman on 23 July 2024 at 11:00 AM in Parliament}

Even I am an emotional person and deeply respectful toward the government, but when decisions start shaking my financial pillar, I also have to speak in a hard tone because emotions cannot protect economic reality.

“FIIs and FPIs may come and go but today the Indian retail investors have proven that any shock that may come in is now taken care of because of the shock-absorbing capacity the Indian retail investors have brought into the Indian market.”
— Finance Minister Nirmala Sitharaman in Lok Sabha, 4 April 2022.

She said this while defending the strength of domestic investors during periods of FII selling.

 My interpretation – The statement was simple: Indian retail investors and DIIs were absorbing the selling pressure created by foreign investors. It showed the growing strength of domestic participation. She did not literally say “we don’t need FIIs,” but the overall tone suggested that India was becoming less dependent on foreign portfolio flows than before.

This article is not against India, the government, finance minister or domestic investors. My whole point is simple — a developing economy like India still needs strong FII participation.

Today many global markets are making fresh highs and attracting strong capital flows, while Indian markets are still struggling to reclaim the same momentum despite having one of the strongest long-term growth stories. That is exactly why policy signals, taxation, investor confidence, and FII participation matter more than emotional narratives in a developing economy.

India is still a growing economy where companies are aggressively expanding capacity, building infrastructure, investing in technology, entering global supply chains, and trying to achieve consistent QoQ and YoY growth to become large-scale global businesses. That kind of transformation requires enormous long-term capital.

Domestic investors and DIIs have become much stronger, but India still needs FIIs because foreign capital brings liquidity, valuation expansion, global confidence, lower cost of capital, and funding support for ambitious growth cycles. A rapidly developing economy cannot rely only on domestic savings while simultaneously trying to build world-scale manufacturing, energy, semiconductor, AI, defence, and infrastructure ecosystems.

Strong domestic participation gives stability, but sustained global capital participation remains critical for accelerating India’s long-term growth story.

Few recent market changes also appear less favourable for FII participation:

• India increased Short-Term Capital Gains (STCG) tax on equities from 15% to 20%.
• Long-Term Capital Gains (LTCG) tax was raised from 10% to 12.5%.
• Securities Transaction Tax (STT) on Futures & Options trading was also increased.

What attract foreign money

Foreign investors do not chase growth stories alone; they chase post-tax returns, policy stability, and dollar-adjusted profitability. Higher taxes, compliance burden, rupee depreciation, and unpredictable policy changes reduce real returns for FIIs and make other global markets more attractive. Institutional capital reacts early to falling risk-reward, not after price crashes.

Rupees/Dollar ratio

When FIIs pull money out, they convert rupees into dollars, increasing demand for USD and weakening INR. A weaker rupee makes imports expensive, increases inflation pressure, and reduces dollar-adjusted returns for foreign investors. This can create pressure on both the currency and equity markets simultaneously.

Final statement

On one hand, India is inviting foreign companies to build businesses, data centres, and become part of the country’s long-term growth story. On the other hand, saying “FIIs may come and go” creates a mixed signal because global capital watches every message carefully. A developing economy seeking trillions of dollars in investment cannot appear emotionally selective about which foreign capital matters and which does not.

In India, people naturally give huge importance to statements made by the government because the country is deeply emotional and trust-driven. But emotional connection should not become a substitute for questioning economic decisions, especially when the subject is one of the strongest pillars of a nation like the economy and capital markets.

Patriotism and public trust are powerful strengths, but governments should not rely only on emotional narratives when explaining major economic decisions. Citizens must support the nation, but they must also ask difficult questions when policies affect growth, investment, taxation, currency stability, and the future of businesses.

Trust becomes strongest when people are informed honestly, not emotionally managed.

Disclaimer: I am not SEBI registered. This article is purely my personal opinion and interpretation of market conditions, and I may also be completely wrong. This is not intended to offend or disrespect any individual, institution, government, or authority. Everyone is free to disagree, deny, my thoughts and views. If any statement unintentionally hurts sentiments or feels disrespectful, I sincerely apologize, as that was never my intention.