News

Published: May 13, 2024
Updated: May 13, 2024

FIIs aggressively Exit, DIIs Enter to Support. Election concerns drive the market sentiments

Institutional Behaviour

Foreign Portfolio Investors (FPIs) have aggressively withdrawn from the Indian stock market in May, pulling out a staggering Rs 24,975 crore. This contrasts sharply with Domestic Institutional Investors (DIIs), who have been actively purchasing stocks during the same period.

Discrepancy in May

The discrepancy in institutional behaviour has become particularly noticeable this month, with FIIs consistently selling stocks while DIIs eagerly acquire them. FIIs have sold stocks worth Rs 24,975 crore, whereas DIIs have purchased stocks totaling Rs 19,410 crore.

Reasons Behind FII Selling

Market experts attribute the FII selling not only to election concerns regarding the news popping up regarding the not so good performance of the ruling party in the first three phases of the polls but also to India's underperformance compared to other markets. Experts note that India's relative underperformance, especially compared to China and Hong Kong markets, is a significant factor driving FII selling.

'Sell India, Buy China' Trend

The contrast in performance between Indian and Asian markets has led to a strategic shift in FPI investment preferences. FPIs are favouring selling in India, perceived as relatively expensive, and buying in China, particularly through Hong Kong. India's higher price-to-earnings (PE) ratio compared to Hong Kong further reinforces this trend.

Market Outlook

The prevailing trend of 'Sell India, Buy China' adopted by FIIs is expected to continue exerting downward pressure on Indian markets. However, the emergence of clarity on the election outcome could trigger a significant turnaround.

Potential Turnaround:

If election results align favourably with market expectations, aggressive buying from DIIs, retail investors, and HNIs could swiftly counter the prevailing selling pressure from FIIs. This scenario could lead to a rapid upward movement in the market.

Experts anticipate the current market trend to persist in the short term, driven by election-related uncertainties. They suggest the Nifty index may experience further downward movement in the short term, with a possible minor upward correction from crucial support levels.

As the market navigates through turbulent times, fueled by FII exits and DII purchases, investor sentiment remains uncertain. Clarity on election outcomes and upcoming data releases will play a pivotal role in shaping market dynamics. Despite short-term challenges, the potential for a turnaround remains contingent upon favourable developments both domestically and globally.