Foreign institutional investors (FIIs) invested $3 billion in Indian equities in November, the highest since March, but are likely to take further cues from the US Federal Reserve’s policy meeting later this month.
Benchmark equity index Sensex touched a record 33,865.95 points on 7 November, and has since shed 3.05% to 32,832.94 points on 30 November. Year to date, it is up 23.3%.
The net November FII investment of $3.05 billion is the highest since the $5.1 billion in March. Their net investment so far this year stands at $8.86 billion.
“They had sold Indian stocks for a while, and events such as the recap of banks gave them a reason to jump back in. Also, global risk-on trade gave the much-needed impetus," said Gautam Chhaochharia, head of research at UBS Securities India Pvt. Ltd, referring to the net sale of shares by FIIs in August and September. On 24 October, the government announced a Rs2.11 trillion bank recapitalization plan for state-run lenders weighed down by bad loans, seeking to stimulate the flow of credit.
“From here on, FIIs will wait and watch keeping a close eye on how oil prices move, how Gujarat election results pan out, and how the usual high-frequency data turns up," said Chhaochharia, adding that the Union Budget in February could be another big trigger.
Brent crude is up 12.16% for the year to date to $63.73 per barrel. It has been rising since 21 June and has added 37.02% since then.
The two-phase Gujarat state elections will take place on 9 and 14 December, while counting of votes is scheduled for 18 December.
“We think markets are on a structural bull run. When it has run up so dramatically, a small correction is not ruled out. It is difficult to predict how the market will behave in the near term," said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. Ltd.
“Market is worried about oil and election results, and is eyeing them closely. While a Fed rate hike is discounted, investors are watching out for the commentary," he added.
“Intense selling done by FIIs in Korea, Indonesia and Taiwan in last few days raises a question if they will trim their position in India as well," added Shah.
Data from Bloomberg showed that FIIs sold a net of $1.4 billion, $661.5 million, and $1.5 billion of equities of South Korea, Indonesia and Taiwan in the last one week. In contrast, they bought India shares the most in the region at $489.4 million.