Bears will continue to tighten their grip on the Indian markets amid heavy FII selling on Monday. Gift Nifty at 22,690 indicates a gap-down opening of about 300 points.
Puneet Singhania, Director at Master Trust Group, said: foreign investor sentiment also remained weak, with approximately $25 billion in FII outflows since the market peak in late September, driven by concerns over high valuations and a slowing economy. India’s GDP growth is projected to decelerate to a four-year low of 6.4 per cent in this fiscal year, raising apprehensions about corporate profitability and economic stability. Institutional activity reflected net FII outflows of ₹7,793 crore in the cash segment, while DII inflows stood at ₹16,582 crore, offering some support to the market.
Meanwhile, a survey by BofA Research painted a grim picture for Indian stock markets..
Indian equity markets have slipped to the second-least favoured in Asia, according to the latest Bank of America (BofA) fund manager survey. According to the survey, about 19 per cent of fund managers are underweight on Indian equities from a 12-month perspective, a significant jump from 10 per cent in January.
According to Vaibhav Porwal, Co-Founder, Dezerv, since October 2024, India’s market cap has fallen by about $1 trillion, while China’s has risen by $2 trillion. “This suggests a tactical shift in FII flows. Data from NSDL shows that Foreign Portfolio Investors (FPIs) pulled out approximately ₹25,000 crore from Indian equities in January 2024 alone, in sharp contrast to the substantial inflows of over ₹1.7 lakh crore in 2023. This FII outflow can be driven by several factors beyond simple reallocation,” he added.
Although India’s long-term growth story remains strong, near-term valuation worries and concerns over sluggish corporate earnings have led to profit-booking. India continues to trade at a premium compared to other emerging markets, prompting global investors to reassess their positions, he further said. “A strong dollar often attracts capital to the US markets, considered safer and more stable. This could have been a factor in FII outflow from emerging markets like India,” he said.
Seven sectors experienced consistent outflows for four consecutive fortnights, reflecting the bearish stance of FPIs, according to a study by SAMCO Securities. The financial sector has been under significant bearish pressure from FPIs over the past few months, recording the highest outflow of ₹34,631 crore in the last four fortnights, followed by the FMCG sector with an outflow of ₹10,898 crore, it added.
However, the Reserve Bank’s liquidity injection measures will calm the nerves, said some analysts. The Reserve Bank of India (RBI) on Friday injected rupee liquidity for a longer duration through another $10-billion dollar-rupee buy-sell swap arrangement. The central bank’s initiative is designed to provide a durable solution to the system’s liquidity requirements, while also stabilising the value of the rupee and bolstering the nation’s foreign exchange kitty.
Dilip Parmar, Research Analyst, HDFC Securities, said there will be a short-term positive impact on the rupee. “The swap mechanism can help stabilise the currency by providing immediate liquidity support, thereby mitigating the pressure on the rupee during periods of foreign fund outflows. This temporary relief can bolster market confidence and prevent excessive volatility in the exchange rate,” he added. Spot USDINR can move towards 86.30.