FIIs cash sales in FY22 highest since India entry
MUMBAI: Foreign investors appear to have turned decidedly bearish on Indian stocks ahead of the FY23 Union Budget. Their share sales of Rs 63279 crore in the fiscal year through January 28 (FY22) are the most in any fiscal year since FY1993 when the then government threw open Indian stock markets to them. The second-highest sale by them in any fiscal occurred in FY2009, as a result of the Global Financial Crisis. A majority of the FY22 sales have occurred in January, which, at Rs 33,288 crore, is the highest sale in any month since March 2020 (minus Rs 61973 crore), when the Pandemic first roiled the global economy and markets.
Both fiscal and January figures include Friday’s provisional figure of Rs 5045 crore of sales by FIIs. Prior to Friday, data has been sourced from NSDL. The sales this month have been attributed to the US central bank’s hawkish comments, which suggest their raising interest rates from near zero by March and their winding down of asset purchases to tame record high annual consumer price inflation since 1982. Rising US rates crimp FII returns from emerging markets like India whose currencies depreciate against a stronger dollar. This hits them at the time of repatriating funds back home.
Market impact
The benchmark Nifty 50 has corrected 7.5% from its record high of 18604.45 on October 19 owing to FII selling. The Nifty now trades at 17208.3 and could experience increased volatility just before and on Budget Day.
Market experts like Rohit Srivastava of IndiaCharts and Siddarth Bhamre of InCred Equities, while acknowledging FII bearishness, believe the very high sales positions could itself act as supports for the market amid improving global market prospects and following any positive surprise in the Budget. Srivastava cites the significant bearish build up on index futures - Nifty and Bank Nifty - by FIIs to make a point.
FIIs were net short index futures by a cumulative 63671 contracts as on January 28, the most since March 30, 2020, when they were short 65681 contracts. “Generally when so many shorts are taken, they tend to become market supports and markets generally bounce from levels where such shorts are created,” he added.
Budget sectors & stocks to watch
BFSI: PSU bank privatisation and housing for all under PMAY-CLSS to benefit state-owned banks, HFCs
Infra: overall infra development to benefit likes of KNR Constructions, PNC Infratech and HG Infra Engineering
Metals: Higher thrust on infra to benefit SAIL, Hindalco
Pharma: Encouraging investments in capacity expansion etc. to help Gland Pharma, KIMS, HCG
Source: Axis Securities