Overseas investors continued to remain net sellers in the domestic equity markets for the eight consecutive months in May, registering the longest such streak at least in the past 22 years. Data available with Ace Equity showed that foreign institutional investors (FIIs) have sold shares worth over Rs 2 lakh crore between October 1, 2021 and May 27, 2022.
Earlier, they stood as net sellers for seven straight months in 2008, when they offloaded shares worth Rs 44,380 crore (net investment) between May 2008 and November 2008.
Commenting on the ongoing selling by FIIs, VK Vijayakumar, chief investment strategist, Geojit Financial Services said, “Relatively high valuations in India, rising bond yields in the US, an appreciating dollar and concerns regarding the possibility of a recession in the US triggered by aggressive tightening are factors behind FPI pullout.”
Sector-wise, FIIs have cut their stake in financial services to Rs 13.29 lakh crore as of May 15 this year from Rs 15.75 lakh crore on September 30, 2021 according to data available with NSDL. They also reduced holdings in other sectors including capital goods (to Rs 0.87 lakh crore from Rs 1.33 lakh crore), realty (to Rs 0.50 lakh crore from Rs 0.67 lakh crore), and information technology (to Rs 5.55 lakh crore from Rs 7.05 lakh crore) among others. They upped their holdings in sectors including automobiles, consumer durables and utilities.
On the other hand, heavy buying by domestic institutional investors (DIIs) has capped the downside for Indian equity markets. DIIs have bought shares worth around Rs 2.50 lakh crore in the past eight months.
The benchmark equity index BSE Sensex has cracked 7 per cent since October 1 last year, while broader indices the BSE Midcap and BSE Smallcap have lost 11 per cent and 9 per cent, respectively, during the same period.
G Chokkalingam, founder, Equinomics Research and Advisory believes that FIIs may not turn major buyers into Indian equities for the next 2 to 3 months as they would wait for markets to discount another 50 bps to 100 bps rate hikes in the short term.
While sharing his views on the further movement of the domestic equity markets, Amit Gupta, fund manager-PMS, ICICI Securities said, “The market is driven by an event and liquidity outflow is led by that. Till the Russia-Ukraine war continues, markets could continue to witness higher volatility. However, Nifty earnings have not shown any sign of downgrade yet and thus whenever FII outflows stop, markets can revert quite swiftly.”
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