NEW DELHI: While the Indian equity market has been going up again since the start of September after a brief hiatus in August and hit record-high levels this past week, the foreign institutional investors, a major force in the local market, are seen giving this rally a miss.
According to market experts, worries about an impending interest rate hike in the United States and its impact on the global economy have made investors more cautious about investing money in a market that at present is commanding an expensive valuation.
FIIs were pumping money into Indian equities between March and August this year and brought in R 1.74 lakh crore during the period. However, so far this month, when the benchmark indexes - BSE Sensex and NSE Nifty50- have risen by about 4.5% each, FIIs have pulled out a net of about R4,800 crore and there are chances that they might sell more in the coming days.
As per NSDL data, this month till September 15, FIIs sold R 4,768 crore worth of equities. This figure includes bulk deals and investments through the primary market. In the cash market, FII selling was R9,579 crore. “Since the market is at record highs and valuations are high, FIIs are likely to press sales in the coming days. With high bond yields in the US (the 10-year is at 4.28%) and the dollar index above 105, FIIs are likely to sell more,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He added that even though the FIIs have been sellers in the cash market it didn’t impact the market at all since it was neutralised by DII buying of R8,309 crore through September 15. The benchmarks- Sensex and Nifty- gained about 1.5% each last week with Nifty closing a record high of 20,192.35 and settling at a record close of 67,838.63 on Friday. The mid-cap and small-cap saw profit booking this past week. FIIs are a very important component of the Indian market as their holdings over the last 20 years have increased significantly.