BackFII selling unabated, offload ₹21,287 crore in cash market this month; DIIs net buyers
High US bond yields, stronger US dollar and high crude oil prices continue to trigger FII selling in Indian markets --which creates a bleak picture for near-term prospects, according to analysts.
PremiumForeign institutional investors (FIIs) continued their selling streak even as Sensex and Nifty snapped their six-day losing streak on Wednesday, September 27, on strong macroeconomic indicators. The domestic institutional investors (DIIs) turned net buyers again and invested ₹386 crore in Indian stocks today.
As per the NSE data, FIIs cumulatively bought ₹9,575.17 crore of Indian equities, while they sold ₹9,929.52 crore --- resulting in an outflow of ₹354.35 crore on Wednesday. Meanwhile, DIIs infused ₹8,419.68 crore and offloaded ₹8,033.40 crore, registering an inflow of ₹386.28 crore.
FIIs have sold ₹21,287 crore in cash markets so far this month, according to analysts. The US Treasury yields hit a multi-year high and the US dollar rose to a 10-month high level amid concerns over interest rates staying high for an extended period and its impact on the global economy. This has largely supported the FII selling streak since August.
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FII selling paints bleak picture for Indian markets
Domestic equity benchmarks Sensex and Nifty snapped a six-day losing streak and settled higher on Wednesday on strong macroeconomic indicators and positive trends in Asian markets. The frontline indices however, opened in a negative territory tracking weak global cues and rebounded in the second half of the session.
The 30-share BSE Sensex opened 0.23 per cent lower at 65,782.84, while the Nifty 50 opened 0.20 per cent lower at 19,613.50, underscoring volatility in the financial markets ahead of the F&O expiry on Thursday. Indices recouped losses and recovered in the second half driven by select heavyweights such as Reliance Industries and ITC as well as positive opening in European markets.
Upon recovery, Nifty 50 reclaimed the 19,700-mark and hit an intra day high of 19,730.70 while the Sensex claimed a day's high of 66,172.27. The Nifty 50 finally closed at 19,728.25, up 63.55 points, or 0.32 per cent. The 30-share BSE Sensex closed 173 points, or 0.26 per cent, higher at 66,118.69.
However, analysts reckon that persistent selling by foreign investors and global cues such as rising US bond yields and crude oil prices presents a bleak picture for markets in the near-term. The benchmark Nifty 50 has retreated from its record-high level achieved earlier this month on unfavorable global triggers.
"The triple whammy of rising dollar, spiking US bond yields and high Brent crude continues to impact Indian equity markets. The cues from the mother market US also are negative. It appears that the market is pricing in a ‘higher for longer’ rate regime in the US, which is not favourable to equity markets in the near-term,'' said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
In September, Indian markets have seen both highs and lows with the Nifty 50 index crossed the mark of 20,000 before entering a phase of correction. The benchmark index is up nearly 10 per cent for the year and is set to post its eighth straight year of positive returns. Nifty 50 has also emerged as the top performing index in September globally, according to analysts.
The ‘buy on dips’ texture of the market which took the Nifty beyond 20,000 has now changed to ‘sell on rallies’…bulk of the selling has been coming from FIIs. Since the dollar index is now above 106 and the US 10-year yield is strong around 4.55 per cent, FIIs are likely to continue selling, rendering the market weak. Large banking stocks are likely to remain weak on FII selling,'' added Dr. V K Vijayakumar.
FII selling to lend opportunities for domestic investors?
Market analysts observe that FII selling can open new opportunities for domestic investors as they are not driven by the movement of US bond yields. In September, so far, even while selling in the market, FIIs were big buyers in financials and capital goods.
Feeble global cues combined with pressure on select heavyweights are currently weighing on the market sentiment. Going ahead, recovery in the banking and financial majors would be critical for any meaningful rebound else the corrective tone would continue, according to analysts.
‘’Nifty recovered from lower levels amid buying in index heavyweights and closed with marginal gains of 52 points at 19716 levels. Broader market outperformed with Nifty Midcap 100 and Nifty Smallcap 100 up 0.8 per cent and 1 per cent respectively,'' said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services
Markets saw some respite after the previous day’s sell-off but the pressure still continues given several concerns regarding rising interest rates, crude oil prices, and growth concerns in China, according to analysts.
‘’Long-term investors can use this weakness to buy high quality private banks and the leading PSU banks since the banking sector will continue to do well, going forward. Importantly, valuations in the banking segment are fair,'' said Dr. V K Vijayakumar.
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