The Indian market may find it hard to see any significant rebound in the near term, given the bearish stance taken by foreign institutional investors (FIIs) over the last few days and lack of counter buying support from domestic institutional investors (DIIs), believe experts.
The intensity with which markets have fallen recently on small FII selling has made participants anxious. The benchmark Sensex has tumbled 3.08% in the last 3 days with FIIs selling equities worth just Rs800 crore in the cash market.
VK Sharma, head of private broking and wealth management, HDFC Securities, attributes this sharp slide to waning confidence among institutional investors. “The confidence among foreign investors seems to be going down as there are concerns both on the global front in the form of European issues and local ones like high current account deficit, growth and an uncertain political scenario. Despite the long-only foreign investors putting a substantial amount of money over the last 2-3 months, neither the market nor the currency went up substantially, but the small amount of selling has led to market slide, which is a concern,” he said.
The fall has been much swifter on lower volumes, with the Sensex losing 73 points on every Rs100 crore of FII outflows. Juxtapose this against the Sensex gaining just 0.92 points for every Rs100 crore of FII inflows last fiscal, which proves the concerns are valid.
The selling may be from some long-only funds. Contrary to the perception that selling has been due to exchange-traded funds (ETFs) selling, an analysis by dna on asset under management of major India-dedicated funds reveals that there have been no major redemptions over the last 3 days. Their AUM has fallen in line with combined Nifty and currency fall of around 4.2%.
The lack of counter buying by DIIs during such a sharp fall has made things even ominous, believe experts. Siddarth Bhamre, head (derivatives), Angel Broking, sounds not too upbeat on markets. “There has been hardly any major support from DIIs. FIIs, on the other hand, are also shorting index futures while buying call options to hedge their short positions. Also, we are seeing put accumulation at around 5300 levels, indicating people betting on further downside. So, any kind of support at 5500 levels that we may see may be short-lived,” he said.
There’s also a feeling that weakness in the banking index may put pressure on markets further.
The big financial stocks like Axis Bank, HDFC, Yes Bank and ICICI Bank saw a slide of 5-6% each over the last 3 days. “The Bank Nifty which has seen rollover of shorts during the last expiry is likely to be a contributor to market’s downfall,” said Bhamre.
Sharma, too, sees market struggling to make any sharp upmove in the near term as selling is likely to come in at higher levels.
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