Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.
Indian market which was hitting record highs just in the first month of the year 2018 came under selling pressure soon after the Budget was announced and weak global cues too played a spoilsport.
Foreign institutional investors (FIIs) which remained net buyers of Indian equities to the tune of $8 billion in the year 2017 but have now turned net sellers in the month of February.
They poured in over Rs14000 crore in the month of January 2018 but turned net sellers in February as they pulled out over Rs12000 crore, SEBI data showed.
Plenty of stocks in which FIIs hold double-digit stake corrected up to 60 percent in the first two months of the year 2018.
It is not clear if FIIs were selling their stake but anecdotal evidence suggest that as many 46 stocks which more than doubled investors’ wealth in 2017 saw the correction of up to 60 percent in the year 2018.
Stocks like Vakrangee which rose 208 percent in the year 2017 saw a deep cut of 57 percent so far in the year 2018, followed by Jaiprakash Associates which rallied 222 percent, plunged 43 percent in a matter of just 2 months, and Forbes & Company rose 151 percent, saw a cut of 33 percent.
Other stocks which saw a double-digit cut include names like Unitech, followed by PC Jeweller, Future Consumer, Motilal Oswal, Jindal Stainless, Time Technoplast, Elpro International, Aegis Logistics, Adani Transmission, TVS Motor Company, DLF, Tata Global Beverages etc. among others, according to data from AceEquity.
Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.
The selling is likely to continue in the future as well, suggest experts. But, on a yearly basis, FIIs investment towards Indian equity markets should turn positive.
I think the selling will continue in the foreseeable future; we might see a rebalancing in FII portfolios allocating additional funds to developed markets as the emerging markets have gotten quite expensive.
With rising interest rates, fixed income is bound to yield a higher return adding further impetus for FIIs to invest in developed markets, the implementation of long-term capital gain tax will not help garner investments either.
Cues from global market suggest that flows from foreign investors will be less than what we saw in the year 2017 largely on account of what US Federal Reserve will do with respect to interest rates and rising bond yields.
US Fed has indicated an increase in rates for 2018, the direction of which will be set in meeting on 21st March. Increase in rates is definitely a negative event for foreign liquidity.
At the same time, it is also determined by country fundamentals, which are improving. Therefore, FII flow might not be completely negative for 2018.
MORE WILL UPDATE SOON!!
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