Foreign investors, who had been topping selling in Indian markets among Asian neighbours, turned buyers by netting more than $1.6 billion during the past seven sessions.
According to NSDL data, FIIs invested over $1.6 billion in Indian equities between August 16 and 27. During this period, FIIs sold in only two sessions – August 19 and August 21. Meanwhile, benchmark indices Sensex and Nifty were up more than 1.4% each during this period. BSE MidCap went up by 1.8%, and SmallCap gained around 2.4%.
Analysts said recent FII buying was attributable to large block and bulk deals last week. Key Transactions: ACC, Ambuja Cement deal ($328 million + $650 Mn), Tata Tech (Rupees 2750 crore approx.). GMR Airports recently raised about Rs. 22 billion from Zomato’s new fundraising round, PNB Housing Nbfc and Nykaa.
Some deem the buying to be more sectoral, which does not suggest any major change in the FII outlook on India. After the Jackson Hole meeting, some say there is an expectation for quick cuts by the Fed, which could be positive for FII confidence.
Reliably high economic growth and stable macro data points have made India an attractive market, leading FIIs to shift their stance from selling to seeking liquidity/alpha. However, analysts are split over what is next, with some expecting continued inflows and others awaiting more data.
ALSO READ: RVNL among India Inc’s unlucky 13 with over 25% drop in both sales, profit in Q1
Recently, some positive developments brought back the buying interest of FIIs, noted Dr Ravi Singh, SVP, Retail Research at Religare Broking. This is due to a number of factors, including an improvement in global economic conditions the resultant easing of inflationary pressure, and the outlook for interest rates being seen as stable.
Meanwhile, low GDP growth expectations and stable earnings amid strong fundamentals made India.
FIIs had sold some 2.12 billion dollars earlier between Aug 1-14 the largest outflow amongst emerging markets. Sensex and Nifty dropped more than 1%, while BSE MidCap and SmallCap also fell by 1% and 1.3%, respectively, during this period.
The FIIs pulled out $1.14 billion from Japan, 0.2 billion (in partial), 1.6 billion from South Korea, 1523 million from Taiwan,and the rest @Thailand, this and a very small in vi from August derniers dollars cos pour eux. In turn, they inject $1.35B to Brazil vs. $899M for Indonesia, as well as the other way around with Malaysia ($278m) and the Philippines, with only 121 million less than their north-up neighbor.
According to analysts, FIIs kept offloading in early August on uncertainty over a potential Fed rate cut. Weak US economic data, recession fears and hawkish Bank of Japan volatility sent global markets into a spin.
TO KNOW MORE, CLICK HERE.
Notably, the yen carries trade unwind caused a 20-yen depreciation in the dollar-yen pair between July 3 and August 5 after Japan masterminded the intervention during two Bank of Japan interest rate hikes.
However, markets have since recovered, having been calmed by the Bank of Japan and coming off relatively encouraging US jobless claims data that eased fears about slowdowns.
Souvik Saha, Investment Strategist at DSP Mutual Fund told that the recent FII flows into Indian markets are largely a result of some stock-specific deals rather than an across-the-board sectoral rally.
The Jackson Hole meeting hinted at a potential Fed rate cut, which would be good for emerging markets. Given its domestic robustness in growth and stable government, India should lead the pack.
Saha believes stable earnings will cushion MSMSI India’s 14-15 percent growth this year and another 15-16 percent next year.
Warnings of mid- and small-caps, while volatile, stay stock-specific.
FIIs had moved away from finance earlier and have now turned to the new flocks of discretionary, pharma, healthcare, and energy. We expect FIIs to make a comeback in India.
Going ahead, analysts state that FIIs are likely to remain cautious but opportunistic. A domestic demand uptrend will boost continued inflows into India unless disrupted by global factors or a revision of India’s economic outlook.
But there could be a reversal if global uncertainties return or some developments turn negative, putting further FIIs on the back foot. Given the above, FIIs are likely to remain focused on sectors with a positive growth outlook and companies with sound fundamentals.
RELATED ARTICLES
- Foreign Investors Pump Rs 27,856 Crore into Indian Equities Amid Market Optimism
- Dalal Street Braces for an Action-Packed Week: Seven IPOs and Multiple Listings on the Horizon
- LG Electronics Eyes $1.5 Billion IPO in India to Accelerate Growth
- Broader Indices at Record Highs; Smallcaps Shine as Over 60 Gain 10-30%
- Inox Wind Stock Soars: Over 394% Gain in Just 1 Year – Is More Growth Ahead
