Relentless FII selling weighs on stock markets; indices end flat after a choppy session

• Sensex closed 9.98 points or 0.01% lower at 60,105 while Nifty ended 18.45 points or 0.10% lower at 17,895.
• Foreign institutional investors (FIIs) have offloaded equities worth over ₹10,000 crore in just seven trading days of 2023.
• The World Bank slashed its growth forecasts for most countries and warned that new adverse shocks could tip the global economy into a recession.
• Barring FMCG, auto, pharma and realty all other sectoral indices were in green with metal stocks gaining the most.

Indian benchmark indices end flat after a choppy session on Wednesday on heavy outflows by foreign institutional investors (FIIs) and start to corporate earnings.

Sensex closed 9.98 points or 0.01% lower at 60,105 while the 50-stock index ended 18.45 points or 0.10% lower at 17,895.

Barring FMCG, auto, pharma and realty, all other sectoral indices were in green with metal stocks gaining the most.
Heavy FII sales weighs on sentiment

On Wednesday, Foreign institutional investors (FIIs) offloaded stocks worth ₹3,208 crore while domestic institutional investors or DIIs bought ₹2,430 crore. On Tuesday when Sensex crashed by over 600 points, FIIs sold ₹2,109 crore worth equities.

The year started on a tough note as FIIs offloaded equities worth over ₹10,000 crore in the first seven trading sessions of 2023. Global risks have been making investors cautious as Covid-19 cases are rising along with concerns around global economic growth.

"After a volatile session, the domestic market anchored near the flat line as investors remained cautious ahead of the release of inflation data, though positive sentiments from global counterparts attempted multiple recoveries in between. The relentless selling by FIIs as a result of the premium valuation of the domestic market is weighing on the domestic market," said Vinod Nair, head of research at Geojit Financial Services.

Nair said that India’s CPI for December is expected to remain unchanged, while the US CPI is estimated to cool down further from November’s level of 7.1%.

‘FIIs moving to cheaper markets’
In 2022, foreign portfolio investors overall sold ₹1.21 lakh crore worth of stocks in India on a cumulative basis, data showed. "Higher valuations in India and attractive valuations in markets like China are nudging the FIIs to sell in India and move money to cheaper markets," said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

Terming the ongoing selling by foreign institutional investors as a short-term challenge, Vijayakumar believes it can turn out to be an opportunity for long-term investors.

Last year, when FIIs sold heavily in Indian markets, domestic institutional investors and retail investors had notably purchased almost the same amount of stocks, which helped them make large profits.

Besides, investors have also been factoring in budget expectations for FY24 ahead of the budget meeting on February 1.

“Amid growing geopolitical uncertainty and economic concerns globally, the upcoming Union Budget FY 2023 – 2024 is likely to place a higher emphasis on boosting domestic resources of growth to maintain the current trajectory of India’s economic growth,” said said Subhrajit Mukhopadhyay, executive director at Edelweiss Tokio Life Insurance.

The World Bank slashed its growth forecasts for most countries and warned that new adverse shocks could tip the global economy into a recession. It projected the Indian economy to grow at 6.6% in FY24, slowing down from an estimated 6.9% in FY23.

Global markets in green
US markets ended higher with the benchmark S&P 500 index, closing 0.7% higher, the Dow Jones Industrial Average rising 0.56%. The tech-heavy Nasdaq closed in the green with a gain of 1.01%.

“US stocks finished higher on Tuesday, shaking off earlier losses to extend the new year’s rally ahead of Thursday’s December consumer price inflation data and the kick off of the corporate earnings reporting season later this week. Stocks climbed on bets the upcoming consumer price index will show further softening, which could help build the case for the Federal Reserve to slow its pace of rate hikes,” said Deepak Jasani, head of retail research at HDFC Securities.

Most Asian markets were mixed with Nikkei 225 up 1.03%, Hang Seng index up 0.49% while Shanghai Composite down 0.24%, Taiwan Weighted index was down 0.35%.


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