Foreign institutional investors (FIIs) are likely to continue their selling streak into October as the investors have started the month on a muted noted over high US bond yields. This comes as frontline indices Sensex and Nifty 50 extended losses into the second consecutive session on Wednesday, October 4. The domestic institutional investors (DIIs) are net buyers again and invested ₹1,769.49 crore in Indian stocks today.
As per the NSE data, FIIs cumulatively bought ₹9,848.55 crore of Indian equities, while they sold ₹14,272.57 crore — resulting in an outflow of ₹4,424.02 crore on Wednesday. Meanwhile, DIIs infused ₹10,050.08 crore and offloaded ₹8,280.59 crore, registering an inflow of ₹1,769.49 crore.
FIIs have sold ₹25,000 crore in cash markets last month, according to analysts. The US Treasury yields hit a 16-year high mark and crude oil prices almost touched $98 per barrel last week amid concerns over interest rates staying high for an extended period and its impact on the global economy. This has largely supported the FII selling streak since August.
“Global cues are negative for markets in the near-term. The sustained rise in the US bond yields, which has triggered continuous FII selling, is showing no signs of abating. The dollar index is now clearly above 107 and the US 10-year bond yield is at 4.83 per cent. This means FIIs will continue to sell and the bulls will be on the back foot,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
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Stock Market Today
Domestic equity benchmarks traded lower amid a sharp rise in the US bond yields and US dollar. Nifty 50 started the day at 19,446.30 against the previous close of 19,528.75 and fell about a per cent to hit its intraday low of 19,333.60. The Sensex opened at 65,330.65 against the previous close of 65,512.10 and declined nearly by a per cent to the intraday low of 64,878.77.
Nifty 50 finally ended the day at 19,436.10, down 93 points, or 0.47 per cent, while the 30-share pack Sensex closed with a loss of 286 points, or 0.44 per cent, at 65,226.04. Mid and smallcaps underperformed the benchmarks as the BSE Midcap index closed with a solid loss of 1.52 per cent while the BSE Smallcap index dropped 0.96 per cent.
“Strong US job data is reinforcing Fed’s hawkish stance and multi-year high US bond yields is signalling an impending interest rate hike. Globally, investors are adopting risk-averse strategies due to inflation concerns and the strengthening US dollar. And in India, despite a robust economy, premium valuations of midcaps and recent rally is augmenting consolidation,” said Vinod Nair, Head of Research at Geojit Financial Services.
Is there an opportunity for domestic buyers?
Market analysts observe that the spike in US Treasury yields has been taking a toll on equity markets globally, turning investors cautious in the near term. This along with persistent FIIs selling has pulled the Nifty down by 4 per cent from a recent high of 20,222 levels.
The interest-rate-sensitive sectors like real estate, banking, and metals are the most impacted category, while the FMCG sector is more optimistic in expectation of near-normal monsoon and festival demand. The auto sector is consolidating amid mixed growth numbers and in this weak period, large-cap are a trading safe to hold on, according to Geojit’s Vinod Nair.
Even as global headwinds have triggered FII selling, the valuation of some segments in Indian markets have become attractive, especially tech and new-age stocks.
‘’On the positive side, valuations in some segments are becoming attractive and this may push DIIs and retail investors to buy stocks in such segments. An inevitable consequence of this complex situation is heightened volatility,” said Dr. V K Vijayakumar
‘’Investors should watch out for stocks which look strong even in a weak market. Stocks like Bajaj Finance, L&T and Zomato have been exhibiting strength even in a weak market,” added Dr. V K Vijayakumar.
A significant trend in the market is that fundamentally strong stocks like large cap private sector banks have turned weak on FII selling. However, for the long-term investors, this is an opportunity, according to the analyst.
Where are markets headed?
Experts predict that weakness to persist in the market in the coming weeks till the current headwinds recede. ‘’The Q2 earnings season will start next week and is expected to maintain the growth momentum of previous quarters. Even the pre-quarterly updates released so far indicate healthy traction,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
Market direction going ahead will depend upon the combination of global or local macros and earnings delivery along with management outlook. Investors see some respite in the Nifty 50 index after the recent slide but the upside seems capped citing feeble global cues.
‘’On the other hand, the broader indices are now showing early signs of exhaustion, which may prompt fresh fall in the midcap and smallcap space. We recommend focusing more on trade management and maintaining positions on both sides,” said Ajit Mishra, SVP – Technical Research, Religare Broking.
Technical View: Rupak De, Senior Technical Analyst at LKP Securities observes that the overall market trend remains bearish, with the Nifty trading below critical moving averages.
‘’Looking ahead, the market may continue to follow a bearish trend as long as it remains below 19500, with initial support likely around 19,330, a fall below the said level might take the Nifty towards 19,250-19,200,” said De.
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