They have relentlessly dumped stocks worth Rs 2.56 lakh crore from October last year, but the July numbers is providing a ray of hope, which if sustained could also help the battered rupee.
After being net sellers for nine consecutive months, data from NSDL has shown that so far in July (1-22), foreign portfolio investors (FPIs) have been net buyers to the tune of Rs 1,099 crore.
Though the number is modest, some experts feel that the worst of their selling may be finally over. Incidentally, June had witnessed the highest net outflow (from October) of over Rs 50,200 crore.
The depositories data also shows that foreign investors have been net buyers in the stock exchanges for 8 trading sessions this month.
Moreover, in the week ended July 22, they bought stocks for four days. “Though it is too early to say if they have stopped selling and started buying, it is a positive sign. If this trend continues, it will not only help the markets but also the rupee,’’ Arun Kejriwal, director, KRIS an investment advisory firm told The Telegraph.
On Friday, the Sensex had gained for the sixth consecutive session and closed above the 56000 mark, aided by the FPI buying and other factors like decline in commodity prices, even as there is some optimism that the inflation in the US may have peaked after rising to 9.1 per cent in June.
Experts say that the slowdown in FPI sales seen during this month is a consequence of falling commodity prices and the recent correction in the markets that have cooled down valuations.
It is also expected that the US Federal Reserve is unlikely to be aggressive on rate hikes after a 75 basis points increase during this week.
The US central bank will meet on two days beginning July 26 and its commentary is seen as giving direction to the markets in the immediate term.
However, this trend comes at a time corporate earnings so far have been timid. Barring Hindustan Unilever, private sector banks and few other firms, entities such as TCS, HCL Technologies, and even Reliance Industries Ltd have missed analyst estimates.
“There is a clear change in FPI action in the market. The relentless selling by them, which started from October 2021 appears to be over. They have significantly slowed down selling in July. The present trend is likely to continue for the near-term. However, a lot will depend on the news from the US, relating to the economy and markets,’’ V.K. Vijayakumar, chief investment strategist at the Geojit Financial Services, said.
Among the sectors, financials and IT have seen the biggest amount of selling from FPIs over the last few months.
According to a recent report from the ICICI Securities, the large scale outflows by FPIs in domestic equities have been largely driven by the fear of aggressive quantitative tightening by the US central bank to tame inflation and relatively higher valuations.
“However, valuations have rationalised significantly from October 2021 levels and the fear of a structural increase in inflation is reducing as global commodity prices decline over the recent past which should build confidence of slowing down of FPI outflows incrementally,’’ it added.
