Ongoing FII sell-off keeps markets on edge

The rally proved short-lived. Indian stocks rose more than 1% following Donald Trump’s victory in the US election. $Investor wealth rose by $7.75 trillion, the benchmark index returned to a downward trend and the rupee also fell to a new low.

Continued selling by foreign institutional investors (FIIs) in cash and derivatives markets has made the market more volatile. Both benchmarks fell more than 1%, erasing much of the wealth gained the previous day. The NSE Nifty index fell 1.16% to 24,199.35 points; the BSE Sensex index fell 1.04% to 79,541.79 points.

To be sure, FIIs also sold shares worth $ $3,713.67 crore as per NSDL data, but this was purchased $Domestic institutional investors (DII) invested Rs 4,889.33 crore.

On Thursday, foreign institutional investors sold shares worth provisionally worth $4,888.77 crore, according to BSE data. Index takes heavy hit as DII buying totals only temporary $1,786.7 Crores.

In addition to cash sales, FIIs also shorted derivatives through stock index futures sales, with total net sales of $1,146.43 crore on Thursday, reflecting their pessimism.

Analysts say this could continue until dollar weakens Mint They are paying close attention to policy comments and policy actions from the Federal Reserve later on Thursday.

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

Rupee continues to slide

Meanwhile, the rupee settled at a fresh low of 84.38 against the US dollar due to selling by FIIs. Since FII selling began in October, the rupee has fallen 0.7% to a fresh low on Thursday.

Had it not been for the Reserve Bank of India (RBI) selling off dollars, the situation could have been worse.

“If the RBI does not intervene, the rupee will depreciate below 85,” said Ritesh Bhansali, Director (Risk Management Consulting) at Mecklai Financial. “If foreign investors continue to sell shares as they did last month, the pressure on local units is likely to persist. , but the decline is likely to be gradual rather than sharp as the RBI sells dollars through PSU banks.”

oversupply

Net value of shares sold by foreign institutional investors $DII net purchases of Rs 94,107 crore in October $1.07 trillion. Despite DII buying, market falls due to lack of supply from IPOs $39,375 crore in October. The total supply of paper is greater than the demand.

This month, as of November 6 (excluding Thursday’s provisional figures), FIIs have sold worth $14,358 Crores, making them $186.6 billion so far this financial year. To be sure, they only became net sellers late last month, having previously been net buyers $89,717 crore from April to September.

Axis Mutual Fund chief information officer Ashish Gupta explains: “The supply of notes issued in the primary market through IPOs and QIPs and PE sales in the secondary market are twice the mutual fund inflows.” Although DII purchases and FII sales Quite, but the market is still falling.

Andrew Holland, chief executive of Avendus Capital Public Markets Alternate Strategies, added: “In order for supply and demand to match, FIIs need to absorb paper supply, but they have been selling off amid disappointing quarterly results and rising U.S. bond yields.

Motilal Oswal’s mid-term review of second-quarter results ended October 31 showed that 34 of the 50 Nifty companies reported flat year-on-year earnings growth as of October 31, compared with an expected growth of more than 2% in the quarter, leading to brokerage business being Cut Nifty, expects FY25 EPS to rise 1.2% $1,059.

Holland expects the rocky ride to continue if the dollar and U.S. Treasury yields continue to rise despite Trump’s public declarations of weakening the dollar.

bond yield

Due to strong employment data and rising crude oil prices, the U.S. 10-year Treasury yield jumped 70 basis points to 4.41% (Thursday intraday) from 3.71% when the Federal Reserve cut interest rates for the first time in four years on September 18, and rose 50 basis points to 4.75-5%.

Axis MF’s Gupta explained that stronger U.S. bond yields would also prompt foreign investors to shift funds from riskier emerging market stocks to the safety of U.S. bonds. “We will have to see the Fed’s comments on inflation after today’s (Thursday) FOMC meeting,” he added.

MSCI India saw the highest foreign outflows among emerging markets (EM) last month, reflected in its negative total return of 7.65 per cent, according to global index provider MSCI, compared with negative returns for the MSCI Emerging Markets Index. 4.32%.

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