FIIs selling bothers market’s near term outlook. What’s best investment strategy

Market


Indian markets rallied on Tuesday after the government trimmed the windfall tax on crude oil. A broad-based buying was seen in markets with FMCG, power, utilities, and capital goods stocks among top performers. Major oil refiners too picked up momentum. However, stubborn selling by foreign institutional investors (FIIs) has bothered the market’s near-term texture ahead. FIIs emerged as net sellers for 17 days in a row. During this scenario, what should be the best investment strategy?

At the time of writing, Sensex was trading at 34,439.17 higher by 429.72 points or 1.26%. While Nifty 50 surged by 109.95 points or 0.61% to trade at 18,004.80.

On Monday, the Indian government slashed the windfall tax on locally-produced crude oil to 1,900 per tonne from 2,100 per tonne after a gap of two weeks. Also, the Centre has reduced additional excise duty on the export of aviation turbine fuel (ATF) to 3.5 per litre from earlier 4.5 per litre and has reduced export duty on diesel to 5 per litre, including cess, from the previous levy of 6.5 per litre.

But the current mood dampener is consistent foreign funds outflow.

FIIs are net sellers for the 11th consecutive day in January so far. While they have been continuously pulling out money from Indian equities since December 23.

So far between January 1st to 16th, FIIs outflow in Indian stocks is currently around 18,169.67 crore. Last month, the outflow was to the tune of 14,231.09 crore, as per Stock Edge data. Meanwhile, the selloffs are around 24,638 crore in the past 17 days.

FIIs and FPIs performance on January 17 will be showed after market hours. 

Also, in the current month, till January 16, FPIs have pulled out 18,808 crore from equities.

In 2022, FPIs sold 1,21,439 crore, while FIIs outflow was a massive 2,78,429.52 crore in Indian equities.

On Tuesday, Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, the dominant trend impacting the near-term texture of the market is the sustained selling by FIIs for the eleventh time this month.

Geojit strategist explained that there is selling even in bluechip names like HDFC Bank, that too, after impressive Q3 results.

Explaining why FIIs are selling, Vijayakumar said, “The simple logic behind sustained FII selling is that India is the only large market where FIIs are still sitting on good profits after the disastrous 2022 performance in most global markets.”

He added, “FIIs are playing it safe by moving money to cheaper markets where there is valuation comfort. The sustained FII selling has turned the near-term structure of the market weak.”

Amidst this, according to Geojit’s strategist, the best investment strategy in the present weak market would be to systematically buy high-quality large-caps in performing sectors like banking, capital goods, telecom, and construction-related segments.

“Soon, India’s strong fundamentals will bring cheer to the market,” he said.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.


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