Foreign investors sell over Rs 18,500 crore of shares in 5 days; what's cooking?

Foreign institutional investors (FIIs) have been on a selling spree in the country amid the ongoing uncertainty over rising inflation, concern over the new COVID-19 variant, named Omicron, and hopes of the US increasing the pace of tapering the massive stimulus.

Data available with depository National Securities Depository Limited (NSDL) showed that overseas investors have sold shares worth Rs 18,698 crore during the past five trading sessions till November 29, taking the net outflow to Rs 2,302 crore on a month-to-date basis. Their net outflows stood at Rs 13,550 crore in October. Overall, they sold equities worth Rs 7,322 crore in the ongoing financial year so far.

Commenting on the factors that lead to the outflow in the past five trading sessions, Ajit Mishra, VP-Research, Religare Broking said, “Firstly, it was the inflation fear and now it is the new COVID-19 variant that is weighing on the sentiment.” Going ahead, he feels that the inflows would depend upon how the COVID-19 situation pans out in the coming weeks.

Investors’ sentiment took a hit after a new variant of COVID-19 was found in South Africa. The benchmark BSE Sensex declined over 2 per cent to 57,260 during the past five trading sessions till November 29.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “Foreign brokerages had downgraded India early this month on high valuations. India’s valuations vis-a-vis emerging market peers also became stretched. The further negative trigger came from the observation of the RBI that valuations are stretched.”

On the other hand, Kranthi Bathini, Equity Strategist, WealthMills Securities said, “FIIs are booking profits from India and also from other emerging markets ahead of holidays in the US and Europe. Concerns over the new Covid variant Omicron also affected sentiment. We believe that FII flows will resume slowly post January next year.”

Sectorwise, the latest data available with NSDL showed that global investors had an exposure of Rs 16,09,755 crore in banking and other financial services as of November 15. It was followed by software and services Rs 7,05,487 crore, oil & gas Rs 5,18,679 crore and automobiles Rs 2,10,139 crore.

Amit Gupta, Fund Manager–PMS, ICICI Securities added that the current dollar strength also suggests the risk-off sentiment and is leading to FII flows currently. Of late, the US Dollar index has increased by 2.27 per cent to 96.01 on November 30 from 93.88 on November 1.