Adding to the selling pressure on Sensex and Nifty, foreign institutional investors or FIIs have been net sellers on Dalal Street to the tune of Rs 28,819 crore so far in the calendar year 2024. However, on the other hand, dollar money has been flowing into debt with total buying so far nearing Rs 35,000 crore.
The main trigger for this divergent trend in equity and debt is the high valuation in the Indian equity market and the rising bond yields in the US, said VK Vijayakumar of Geojit Financial.
January saw FIIs offloading Indian stocks worth about Rs 40,300 crore across seven sectors — financials, FMCG, auto, media, metals, chemicals and consumer durables. Financials saw most of the selling at Rs 30,000 crore.
“This explains the underperformance of Bank Nifty in general and some leading private sector banks in particular. For long-term investors, there is value in banking stocks now. FPIs were buyers in IT and telecom, which explains the resilience of the leading players in these segments,” he said, adding that a reversal of FPI selling in equity will happen when the US bond yields drift down and stay there for long.
Last month, FIIs were seen picking up stocks in IT, oil and gas, telecom, power, and capital goods. FII dollars chased the IT sector for the third consecutive month in January, as they net bought stocks worth Rs 4,485 crore. Since November, they have pumped over Rs 10,400 crore into the sector in the hope that economic recovery in the US will drive order flows for Indian software exporters.
In the oil & gas sector, FIIs bought stocks worth Rs 3,467 crore last month, after selling shares worth Rs 542 crore in December.
The telecom and power sectors saw net buying of over Rs 2,000 crore each by FIIs last month.
In the December quarter, FII share by value in companies listed on NSE went down to 18.19% from 18.40% quarter-on-quarter. In INR value terms, FII holding rose 12.7% to Rs 65.11 lakh crore, according to showed PRIME Database report.
During the week, the equity market remained volatile, responding to events like the Fed Policy announcement, and the RBI policy in quick succession.
“That it may be a while before the central banks would go in for a rate cut has not pleased many, though the expectation is that the central banks would ultimately relent and that peak rates are behind us. While fundamentally the markets remain good, some amount of profit booking could result in further decline in the coming weeks,” said Dr. Joseph Thomas, Head of Research, Emkay Wealth Management.
