Continuous FII selling to keep the market on edge

The rally proved short-lived. India’s stock markets rise more than 1% a day after Donald Trump’s victory in the US elections Investors’ wealth plunged to Rs 7.75 trillion as benchmark indices returned to decline, with the rupee hitting new low.

The market declined due to continued selling by foreign institutional investors (FIIs) in the cash and derivatives markets. Both benchmark indices fell more than 1%, wiping out most of the gains made the day before. NSE Nifty fell 1.16% to 24,199.35 and BSE Sensex fell 1.04% to 79,541.79.

To be sure, FIIs had sold shares even on Wednesday, the day of US election results. According to NSDL data, Rs 3,713.67 crore, but this was compensated by purchases Domestic Institutional Investors (DIIs) invested Rs 4,889.33 crore.

FIIs sold shares at provisional price on Thursday 4,888.77 crore, according to BSE data. Indices took a hit as DII buying was only temporary 1,786.7 crores.

Apart from cash sales, FIIs are overall shorting derivatives with index futures sales. 1,146.43 crore on Thursday, reflecting their bearish sentiment.

Analysts say the situation may continue until the dollar weakens peppermint who are closely watching the US Federal Reserve’s policy commentary and policy action later on Thursday.

The Fed is expected to cut its policy rate by 25 basis points from the current range of 4.75-5%. One basis point is one hundredth of one percentage point.

Rupee continues to fall

Meanwhile, the rupee closed at a new low of 84.38 against the greenback due to selling by FIIs. The rupee on Thursday fell 0.7% to its new lowest since October, when FIIs started selling.

It could have been worse, but the Reserve Bank of India (RBI) was selling dollars.

“Had the RBI not intervened, the rupee would have fallen below 85,” said Ritesh Bhansali, director (risk management consulting), Mecalai Financial. “If FIIs continue to sell equities like last month, the local unit may remain under pressure, but the fall may be gradual rather than sharp due to RBI’s dollar selling through PSU banks.”

too much supply

FIIs sold net worth shares Purchases worth Rs 94,107 crore were made in October while DIIs made net purchases. 1.07 trillion. Despite DII buying, the market declined as supply from IPOs alone was around Rs 39,375 crore in October. The total paper supply exceeded demand.

How much worth of shares have FIIs sold this month, till November 6, excluding Thursday’s provisional data 14,358 crores, making them sellers Rs 18,660 crore so far in the current financial year. Sure enough, after becoming net buyers, they became net sellers just late last month Rs 89,717 crore from April to September.

Explaining the reason, Ashish Gupta, CIO, Axis Mutual Fund, said, “The supply of paper through IPOs and QIPs in the primary market and PE sales in the secondary market is twice the inflow of mutual funds.” Why were markets falling despite DII buying equaling FII selling?

“For supply and demand to be equal, FIIs need to absorb paper supply, but they are selling amid disappointing quarterly results and rising bond yields in the US,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies. Are.”

An interim review of Motilal Oswal’s Q2 results on October 31 showed that 34 of the 50 Nifty companies reported flat year-on-year earnings growth as of October 31, compared to estimates of growth of more than 2% for the quarter. , which led to reduction in brokerage. Estimated Nifty FY25 earnings per share up 1.2% 1,059.

Hollande expects the tough times to continue if the US dollar and US Treasury yields continue to rise despite Trump’s stated aim of weakening the dollar.

bond yields

US 10-year bond yields rose 70 basis points to 4.41% (Thursday intraday) on strong jobs data and rising crude prices, from 3.71% on September 18, when the Fed cut rates for the first time in four years. Was done. , up 50 bps to 4.75-5%.

Axis MF’s Gupta points out that strong US bond yields also prompt foreign investors to shift funds from riskier emerging market equities to the safety of US bonds. “We will have to see the Fed’s comments on inflation after the FOMC meeting today (Thursday IST),” he said.

MSCI India has seen the highest foreign outflows among emerging markets (EMs) last month, reflected by negative gross returns of 7.65% versus 4.32% from the MSCI EM index, according to data from global index provider MSCI.

Thursday’s decline was led by ICICI Bank, Reliance Industries, Trent, Hindalco and Infosys, which accounted for more than two-fifths of the Nifty’s 285-point decline.