FII Sell-Off in Indian Stock Markets

FII Sell-Off in Indian Stock Markets

This week, i wrote a post on how ๐ˆ๐ง๐๐ข๐š๐ง ๐ž๐ช๐ฎ๐ข๐ญ๐ฒ ๐ฆ๐š๐ซ๐ค๐ž๐ญ๐ฌ ๐ ๐ž๐ญ ๐š๐Ÿ๐Ÿ๐ž๐œ๐ญ๐ž๐ ๐›๐ฒ ๐ญ๐ก๐ž ๐œ๐ซ๐š๐ฌ๐ก ๐ข๐ง ๐’&๐ ๐Ÿ“๐ŸŽ๐ŸŽ ๐ข๐ง๐๐ž๐ฑ. Thus, i looked at the latest 30 days’ trading history of FIIs/DIIs to look at the impact of the sell-off leading to corrections in Indian stock markets.

I believe there is nothing fundamentally wrong with Indian markets except rising crude oil prices. Inflation is not a severe problem for us as the US because in the US, despite the hikes in fed rates, inflation does not show any sign of cooling.

Yesterday, when talking to a senior executive inย Goldman Sachs, i asked him why the firm is looking to exit its investments in India as India looks fundamentally strong against other markets. He responded that due to ๐Ÿ๐ž๐ ๐ซ๐š๐ญ๐ž ๐ก๐ข๐ค๐ž๐ฌ, ๐ญ๐ก๐ž ๐œ๐จ๐ฌ๐ญ ๐จ๐Ÿ ๐œ๐š๐ฉ๐ข๐ญ๐š๐ฅ ๐ก๐š๐ฌ ๐ข๐ง๐œ๐ซ๐ž๐š๐ฌ๐ž๐, and with the fed limiting the supply of USD, the ๐๐จ๐ฅ๐ฅ๐š๐ซ ๐ก๐š๐ฌ ๐ฌ๐ญ๐ซ๐ž๐ง๐ ๐ญ๐ก๐ž๐ง๐ž๐ ๐š๐ ๐š๐ข๐ง๐ฌ๐ญ ๐จ๐ญ๐ก๐ž๐ซ ๐œ๐ฎ๐ซ๐ซ๐ž๐ง๐œ๐ข๐ž๐ฌ. Thus, despite the strong fundamentals in Indian markets, the ๐ˆ๐ง๐๐ข๐š๐ง ๐ซ๐ฎ๐ฉ๐ž๐ž ๐ฐ๐ข๐ฅ๐ฅ ๐œ๐จ๐ง๐ญ๐ข๐ง๐ฎ๐ž ๐ญ๐จ ๐Ÿ๐š๐ฅ๐ฅ ๐š๐ ๐š๐ข๐ง๐ฌ๐ญ ๐ญ๐ก๐ž ๐”๐’๐ƒ. Therefore, it is prudent for them to take the capital back and invest in high-yield fixed deposits.

Further, the DIIs in India are trying to compensate for the FII’s sales, and most of the money for DIIs comes from retail investors. With the strong possibility of the ๐”๐’ ๐ ๐ž๐ญ๐ญ๐ข๐ง๐  ๐ข๐ง๐ญ๐จ ๐ซ๐ž๐œ๐ž๐ฌ๐ฌ๐ข๐จ๐ง, ๐ญ๐ก๐ž๐ซ๐ž ๐ข๐ฌ ๐ง๐จ ๐ซ๐ž๐š๐ฌ๐จ๐ง ๐ฐ๐ก๐ฒ ๐ˆ๐ง๐๐ข๐š ๐ฐ๐ข๐ฅ๐ฅ ๐ง๐จ๐ญ ๐ ๐ž๐ญ ๐ข๐ฆ๐ฉ๐š๐œ๐ญ๐ž๐. In that scenario, it is difficult for DIIs to fund capital because retail investors would not have enough savings due to higher inflation and want to deposit their money in banks rather than mutual funds.

Thus, in my view, ๐™™๐™š๐™จ๐™ฅ๐™ž๐™ฉ๐™š ๐™ฉ๐™๐™š ๐™จ๐™ฉ๐™ง๐™ค๐™ฃ๐™œ ๐™›๐™ช๐™ฃ๐™™๐™–๐™ข๐™š๐™ฃ๐™ฉ๐™–๐™ก๐™จ ๐™ž๐™ฃ ๐™„๐™ฃ๐™™๐™ž๐™–๐™ฃ ๐™ข๐™–๐™ง๐™ ๐™š๐™ฉ๐™จ, ๐™ฉ๐™๐™š ๐™จ๐™ฉ๐™ค๐™˜๐™  ๐™ข๐™–๐™ง๐™ ๐™š๐™ฉ๐™จ ๐™จ๐™๐™ค๐™ช๐™ก๐™™ ๐™›๐™ช๐™ง๐™ฉ๐™๐™š๐™ง ๐™จ๐™ก๐™ž๐™™๐™š ๐™ฉ๐™ž๐™ก๐™ก ๐™ฌ๐™š ๐™™๐™ค๐™ฃ๐™ฉ ๐™œ๐™š๐™ฉ ๐™ฅ๐™ค๐™จ๐™ž๐™ฉ๐™ž๐™ซ๐™š ๐™ฃ๐™š๐™ฌ๐™จ ๐™›๐™ง๐™ค๐™ข ๐™๐™ ๐™ง๐™–๐™ž๐™ฃ๐™š ๐™–๐™ฃ๐™™ ๐™๐™Ž ๐™ž๐™ฃ๐™›๐™ก๐™–๐™ฉ๐™ž๐™ค๐™ฃ ๐™จ๐™๐™ค๐™ฌ๐™จ ๐™จ๐™ž๐™œ๐™ฃ๐™จ ๐™ค๐™› ๐™–๐™—๐™–๐™ฉ๐™š๐™ข๐™š๐™ฃ๐™ฉ.



3 Comments

Leave a Reply

%d bloggers like this: