New Delhi, Jan 4 As foreign institutional investors’ (FII) selling in India continues to dominate headlines, the clear message is that FII selling is due to high valuations in the secondary market and in the primary market where the valuations are fair, they have been sustained investors, market watchers said on Saturday.
Amid persistent FII outflows, domestic institutional investors (DIIs) have also maintained their optimistic stance.
According to experts, the general perception that the market has turned weak due to sustained FII selling during the last three months is largely true.
“However, what is not generally appreciated is that even while selling in the cash market through exchanges, FIIs have been buyers through the primary market. They have been big investors through the Qualified Institutional Placement (QIP) route,” said Dr V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
For the month of December, FIIs sold equity for Rs 2,590 crore through the exchanges, but they bought equity for Rs 18,036 crore through the ‘primary market and others’ category.
In 2024, FIIs sold equity heavily for Rs 121,210 crore but they bought equity for Rs 121,637 crore through the primary market.
Therefore, FIIs have net bought for Rs 427 crores in 2024.
“FIIs are likely to continue to sell going forward, so long as the dollar continues to rally and the US bonds yield attractive returns. The dollar index at around 109 and the 10-year bond yield above 4.5 per cent are strong headwinds for FII flows,” explained Kumar.
Despite stock market volatility amid geo-political uncertainties, FIIs remained net investors in the country, as the country’s economy showed tremendous resilience.
According to Manoj Purohit, Partner and Leader, Financial Services Tax, Tax and Regulatory Services, BDO India, the return of foreign participants to India market can be attributed to various factors.
Primarily, on the macro front, the recent policy announcements in the US impacting the peer countries, settling geopolitical situation among Middle East countries, the well-controlled inflation, and interest rate check are some of the factors, he mentioned.
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