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Business News/ Markets / Stock Markets/  FPI flows may remain volatile in the near term, feel analysts

FPI flows may remain volatile in the near term, feel analysts

Stock market today: With no clarity on Interest rate cut timeline in the US, FPI are adopting a risk-off strategy, a stance likely to persist temporarily owing to their cautious approach towards emerging economies, said analysts. The FPI have net sold ₹28488 crore worth equities ytd till 12 Feb.

FPI flows may remain volatile in the near termPremium
FPI flows may remain volatile in the near term

The markets have remained volatile in past few sessions. As on one hand the US federal Reserve has not given any indication of an early rate cut against market expectations of a rate cut by March, the various data points also have not been providing any clear road map for the rate cuts.

The Sensex and the Nifty that closed with cuts of more than 0.7% on Monday, though rebounded on Tuesday. Nevertheless broader trend remains side ways to negative. Nifty-50 index and Sensex are down 2-3% in last one month.  

Mid-cap, Small Caps may see near term pressure persist

The midcaps and small caps that corrected on Monday see correction continue and NSE smallcap 100 index and NSE midcap 100 index were down 0.56% to 1.3%.

Also Read- RIL share price hits record high; mcap tops 20 lakh crore for first time; what should investors do?

There is uneasiness in the large traders including High and medium net worth Individuals too, as was visible in trade on Monday. The market saw steep corrections despite Foreign Portfolio investors (FPI) and Domestic institutions remaining net buyers.

Large traders including HNI's resorted to selling in mid-caps, small-caps and public Sector undertakings (PSUs), said experts. The sentiments had been impacted with correction in broader indices and hence at some point of time profit booking was being anticipated by large traders in mid-cap, small-caps and even PSU stocks. The Q3 results have also not been supportive for stocks that had seen sharp rally pointed out Deepak Jasani, Head of retail research, HDFC Securities Ltd.

The surge in margin requirements prompted retail investors to decrease exposure rather than inject additional funds, primarily impacting mid- and small-cap stocks, said Vinod Nair, Head of Research, Geojit Financial Services . This pattern is anticipated to persist momentarily, given high level of margin funding and their historically elevated premium relative to large-cap, said Nair. Maintaining this premium valuation may prove challenging for the broader market, as corporate earnings are forecast to decelerate due to operational margin moderation, feels Nair. Consequently, large-cap stocks are projected to outshine the broader market during this consolidation phase, added Nair

FPI flows to remain volatile

The FPI who had been buyers on Monday however are net sellers worth 28488 crore year to date ill 12Th February as per NSDL data. The flows may also not remain supportive since bond yields have again started rising in the US and even dollar has strengthened, making investments in emerging countries less attractive. The Corporate results will again play an important role in prompting FPI flows also have been a mixed bag in  Q3 . Jasani expects volatility in FPI flows to continue in the near terms.

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Currently, FPI is adopting a risk-off strategy, a stance likely to persist temporarily owing to their cautious approach towards emerging economies, said Nair. This cautious stance stems from expectations of decelerating corporate earnings, elevated interest rates, and lofty valuations. A reversal of this trend may occur once the market anticipates a significant decline in interest rates by respective central banks, which could stimulate economic growth & equity valuation, added Nair.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions











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Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 13 Feb 2024, 01:32 PM IST
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