The Indian markets are currently experiencing aggressive selling by Foreign Portfolio Investors (FPIs), with a massive amount of Rs 17,082 crores being pulled out in May, according to data from the National Securities Depository Limited. Furthermore, Foreign Institutional Investors (FIIs) have also unloaded a larger sum of Rs 24,975 crores in the cash market. This disparity in institutional activity has become more apparent this month, with FIIs consistently selling stocks while Domestic Institutional Investors (DIIs) are avidly buying them up. Throughout the month, FIIs have offloaded stocks worth Rs 24,975 crores, whereas DIIs have made purchases amounting to Rs 19,410 crores. This data indicates a decline in the broader market, possibly due to High Net-worth Individuals (HNIs) and retail investors cashing in profits and adopting a cautious stance, especially with uncertainties surrounding the ongoing Indian elections.
Market experts and analysts suggest that the reason behind FIIs’ selling is not solely related to election concerns, but also India’s underperformance compared to other markets. Dr VK Vijaykumar, Chief Investment Strategist at Geojit Financial Services, points out that FIIs are choosing to sell in India and buy in China and Hong Kong due to India’s underperformance. While the Nifty has declined by 2.06 per cent in the past month, the Shanghai Composite and Hang Seng indices in China and Hong Kong have seen significant growth, with gains of 3.96 per cent and 10.93 per cent respectively. The difference in performance has led to FPIs shifting their investment strategy towards selling in India, which is seen as relatively expensive, and buying in China, especially through Hong Kong where the price-to-earnings (PE) ratio is more favorable. This trend of ‘Sell India, Buy China’ is expected to continue putting downward pressure on Indian markets.
However, experts are optimistic about a potential turnaround in the market scenario, particularly with the clarity that may come with the election outcome. If the election results align with market expectations, there could be a surge in aggressive buying from DIIs, retail investors, and HNIs, which could counter the current selling pressure from FIIs and propel the market upwards. This turnaround could stabilize the market and lead to renewed investor confidence in the Indian markets. Additionally, the positive election outcome could potentially attract more foreign investments back into the Indian market, leading to a more bullish trend.
In the midst of the ongoing election uncertainties and FPI selling, it is crucial for investors to remain cautious and monitor market developments closely. The broader market volatility and the divergence in institutional activity highlight the need for a strategic and proactive approach to investment decisions. Investors should consider diversifying their portfolios, focusing on long-term growth opportunities, and staying informed about the latest market trends and developments. By staying informed and adapting to changing market conditions, investors can navigate through the current uncertainty and position themselves strategically for potential opportunities that may arise in the near future.
Overall, the current market scenario in India is characterized by a significant amount of selling pressure from FIIs, driven by both election concerns and India’s underperformance compared to other markets. However, there is optimism among experts that a positive election outcome and aggressive buying from domestic investors could lead to a turnaround in the market trend. It is essential for investors to remain vigilant, stay informed, and adopt a strategic approach to navigate through the volatility and uncertainties in the market. With the right approach and proactive decision-making, investors can position themselves for potential growth opportunities in the evolving market landscape.
