NEW DELHI: Despite the 75 bps rate hike by the US Federal Reserve earlier this month and not-so-cheap valuations on Dalal Street, foreign institutional investors or FIIs have been buying Indian stocks as if there is no tomorrow. FIIs have been net buyers in all the last 10 trading sessions and have cumulatively accumulated equities worth over $3 billion in the period.
NSDL data shows that the net investment by FIIs since October 21 has been to the tune of Rs 24,899.59 crore (over $3 billion). The highest buying was seen two days ahead of the outcome of the US Fed meet on November 2 and continued non-stop even after Powell's hawkish comments signalled that interest rates will rise higher than previously expected.
FII and DII flow on Dalal Street
Interestingly, domestic institutional investors or DIIs have been busy booking profits during the period. In the last 10 sessions, DIIs have been net buyers on only one occasion and have altogether sold stocks worth Rs 6,779.93 crore.
In the calendar year 2022, FIIs have been net buyers in only two months of July (Rs 4,989 crore) and August (Rs 51,204 crore). The total selloff on a year-to-date basis has been more than Rs 151,900 crore.
So what's making FIIs buy truckloads of Indian stocks? Here are 3 major reasons:
1) FOMO
With robust domestic flows holding the market up, Dalal Street has been an oasis of peace amid the turmoil in global markets seen in 2022. Even as the Dow Jones is down over 9% so far in the calendar year, Nifty is up over 5% and is staring at all-time high levels.
"The Indian market has been stubborn and has refused to go down despite rising rates. This is causing serious FOMO among global investors. Once Nifty crosses its all-time high, the FOMO factor will increase," said Rishiraj Maheshwari, founder of RISCH Wealth and Family Office.
2) Earnings
Despite a number of hits and misses, the quarterly earnings season is displaying inherent strength of the Indian economy amid fears of a global recession. Aided by impressive credit growth, improving asset quality and rising margins, the Q2 numbers of banks have been encouraging while IT results have been on expected lines with decent growth.
"Expect decent flow going forward as the growth story of India is intact. Better than expected earnings and comfortable macro numbers are positive for India compared to other emerging markets," said K Dileep, Head of PMS at
Geojit Financial Services
3) Stronger rupee
With the cooling off of the US dollar index from the peak near the 115-level to the sub-110 range, the Indian rupee is also gaining strength. The domestic currency hit a one-month high of 81.39 against the American currency today, after having slipped to a record low of 83.32 last month.
A large part of the FII outflow earlier was attributed to currency depreciation. "The dip in the dollar index below 110 will nudge FIIs to buy more. Nifty is likely to face a significant correction only after crossing the all-time high of 18,604," said Dr V K Vijayakumar of Geojit Financial Services.
Forex watchers expect the rupee to trade with a positive bias on the rise in risk appetite in global markets and a weak dollar.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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