FPIs bought ₹1,433 crore of Indian stocks and the total inflow stands ₹15,375 crore as on November 17, taking into account debt, hybrid, debt-VRR and equities, according to National Securities Depository Ltd (NSDL) data.
FPIs were net buyers till November 15, but reversed the selling trend and invested on November 15 and 16. During August, September-October and till November 15, FPIs cumulatively sold shares for ₹83,422 crore through the exchanges.
‘The resilience of the market and strong movements on favorable days forced a rethink in FPI strategy. That’s why they turned to buyers on the 15th and 16th of this month after sustained selling in the first two weeks of November,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
According to analysts, the sharp decline in the US 10-year bond yield to 4.45 percent turned out to be an inflection point for the parent market and thereby for the global stock markets. Before August, FPIs continued buying in Indian stocks for three months.
US bond yields down to 4.45%: What’s behind the correction?
After the last policy result of the US Federal Reserve on November 1, the yield of US bonds corrected sharply to 4.66 percent according to the prudent comment of the chairman of the Fed Jerome Powell.
The Federal Open Market Committee on fixed rates decided to keep the key overnight interest rates unchanged at 5.25-5.50 percent – a 22-year high mark for the second straight meeting. Other major central banks including the Bank of England and the Bank of Japan have also kept key interest rates on hold – similar to the US Fed.
”The main trigger for this reversal in bond yields is Fed Chairman Jerome Powell’s subtle dovish comment that “despite elevated inflation, inflation expectations remain well anchored.” The market interpreted this statement as the end of the exchange rate cycle. Hence yields have corrected sharply,” said Dr VK Vijayakumar of Geojits.
FPI inflow is likely to continue; This is why
Markets now believe the Fed is done with rates and will slowly begin cutting rates in 2024. If the downward trend in US inflation continues, the Fed may cut rates in mid-2024. This may facilitate FPI inflows into emerging markets (EMs) like India, according to analysts.
Analysts also believe that the Indian market continues to show resilience even amid several challenges and there is growing concern among FPIs that if they continue to sell, they will miss out on the potential rally in the Indian market. This could restrain the FPIs from selling and inflows are likely to continue in the coming days.
What do market trends indicate for FPIs?.
An important trend in the market is the growing power of domestic institutional investors (DIIs), high net worth individuals (HNIs) and retail investors and the declining influence of FPIs. ”FPI selling is completely neutralized by DII and individual investor buying. This is the reason why Nifty is around 19,700, the same level it was in early August,” said Dr VK Vijayakumar.
Domestic equity benchmark indices ended in the red on Friday’s session amid weak signals from the Asian markets and witnessed extremely volatile trading trends. The 30-share BSE Sensex ended lower by 187.75 points or 0.28 percent at 65,794.73 level while the Nifty 50 closed at 19,731.80 level, down 33.40 points or 0.17 percent.
The broader market closed higher than the benchmark indices in the Friday session, the Nifty Midcap 100 closed 0.20 percent higher and Nifty small cap ended flat or 0.09 percent higher.
The RBI action of raising the risk weight of unsecured loans affected the sentiments in the banking and finance segments. ”However, this is likely to be short-lived, as the profitability of the major banks is unlikely to be affected. Institutions will prefer to invest more in sectors like automobiles, capital goods, telecom, pharmaceuticals, IT and construction-related segments in the near term,” said Dr VK Vijayakumar.
Disclaimer: The views and recommendations above are those of individual analysts, experts and second-hand companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Updated: 18 Nov 2023, 17:14 IST