Will the Indian Market get the FII Love Back?

  • Market Overview
  • Editors Pick

Are FIIs taking a U-Turn?

Foreign institutional investors have been net sellers in the Indian markets and have sold more than $35 billion worth of equities. However, this selling spree took a U-Turn and FIIs were net buyers last week and picked stocks worth Rs. 4700 crores. Moreover, in July so far, FIIs have reduced the intensity of selling. This was one of the reasons domestic indices saw a sharp rebound last week and Nifty 50 was up by 373.20 points.

All the sectors barring IT, Pharma, Oil, and Gas stocks ended up in green with Nifty Bank the top gainer showing the biggest rally among all the sectors. Global markets were also buoyant despite inflation and fears of unpredicted rate hikes in the EU and US persisting.

Reason for a rebound last week:-

1. Fed rate hike expectation

Since there is growing fear of recession in the market, Fed may not hike the rate by 100 basis points which were earlier predicted and since the market has corrected so much it is assumed that the expected rate hike is already factored in however if there is an unexpected rate hike then market may see a correction and might turn bearish again.

2. Inflation

Inflation in India has been cooling off from its peaks and was last reported at 7.04%. most commodity prices like Steel , crude oil , and palm oil have already been corrected by 15-20% off their peak levels. It is thus expected that inflation in India has already peaked and the effect of rate hikes and falls in commodity prices may start to be reflected in inflation numbers in the coming months.

3. Valuation

Indian market nifty from a lifetime high at 18604 has gone to 15183. The reason for such falls has been the war and the fear of recession. Recent uptrends in the market suggest that the Indian market has already factored in global challenges. Recent buying from FII also suggests the same and valuation looks comfortable for FII to come back with the amount of cash pile they are sitting on.

Which stocks to benefit when FIIs re-enter

The list provided above is not exhaustive but it is an indicative list that suggests that FII has reduced its shareholding in the nifty50 fundamentally strong stocks. Once the market is stable and the global market return to normalcy then these stock would perform well.

However global challenges like the FED rate hike, if done more than expected, then the Indian market would see more correction so one must carefully enter the market keeping global challenges in check.

Disclaimer: This post is only for educational purposes. Please consult your investment advisor before investing.

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  • Ranjit Kumar Jain @Ranjit Kumar Jain
    Like 4
    • Shubham Asawa @Shubham Asawa
      @Ranjit Kumar Jain what happened, can you explain?
      Like 1
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