FII net selling of Indian stocks hits 10-month high ahead of Budget Day

FII net selling of Indian stocks hits 10-month high ahead of Budget Day

MUMBAI: The last trading session of the domestic equity market ahead of the announcement of the Union Budget for 2021-22 on Monday recorded the highest quantum of net selling by foreign institutional investors in more than 10 months.

Foreign investors today sold Indian stocks worth Rs 5,930.7 crore on the bourses, data available on the NSDL showed. The selling pressure caused the Nifty50 and BSE Sensex to close over 1 per cent lower each.

Prior to today, the highest single-day net sell figure from foreign investors was Rs 6,027 crore on March 13 at the height of the Covid-19 crash in the domestic markets.

While today’s selling from foreign investors may prove to be a high water mark, the cohort has been net sellers in the domestic market for five consecutive sessions; the longest selling streak in recent months. However, they still remain net buyers of local equities for January to the tune of more than $3 billion.

Investors have been concerned about reports that the government may make announcements in the Union Budget with respect to new taxes and a possible Covid-19 cess on corporates and high-earning individuals.

That said, market participants also pointed to the cooling off in the global markets and some profit booking seen in all emerging markets in the past few sessions. Much of the selling was likely driven by foreign exchange-traded funds that follow emerging market equities, said dealers.

Investors recently have been unimpressed by the frothy valuations in some pockets of the global markets and the slower-than-expected rollout of Covid-19 vaccines. Furthermore, some market participants suggested that the US-based hedge funds may be liquidating some of their emerging market positions in order to cover for the losses in their short positions in some US stocks.

Globally, the onslaught of the Covid-19 cases in Europe and the US as well as the delay in launching more fiscal stimulus have raised concerns about the near-term global economic outlook. Those concerns have made equities more vulnerable to volatility because of their extremely high valuations.

“In EMs in general and India also, I would not say there is a bubble here,” Prashant Jain, chief investment officer of HDFC Asset Management Co told ETNow. “…if and when global markets correct, we could also experience some correction, but it would be short lived.”

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