Last month, in April, FPIs sold shares worth Rs 8,671 crore. However, in March and February, FPIs were net buyers to the tune of Rs 35,098 crore and Rs 1,539 crore, respectively after selling shares worth Rs 25,744 crore in January. On a net basis, they are still buyers at Rs 4,589 crore so far this year.
“There is aggressive selling by FPIs in May. The selling by FIIs in the cash market is much higher than this at Rs 24,975 crore,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said as he sees divergence in institutional activity becoming stark this month.
While foreign investors have been pulling their investments from India, domestic investors have come to the rescue. Domestic Institutional Investors (DIIs) have bought equities worth Rs 19,410 crore.
In his view, the sharper declines in the broader market have been because HNIs and retail investors have booked some profits and are in a wait-and-watch mode in response to the noise related to the election outcome.However, he also attributed the recent FIIs selling to the underperformance of India stock markets. Nifty is down by 2.06% in the last one month while China and Hong Kong are outperforming, Vijayakumar said. China’s Shanghai Composite and Hang Seng are up by 3.96% and 10.93%, respectively over the last one month.”The FPI strategy is to sell India which is expensive and buy China which is very cheap mainly through Hong Kong. The PE ratio in India is more than double the PE ratio in Hong Kong. So long as this ‘Sell India, Buy China’ trade sustains FII selling will weigh on the markets. The situation can change dramatically when clarity emerges on the election outcome,” the Geojit analyst said. He expects a pullback in the markets on aggressive buying by DIIs, retail investors and HNIs if election results turn out to be favourable from the market perspective.
In May, Nifty has fallen by 2.5% or 550 points.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
