FIIs turn net sellers in cash market in September; expert cites reasons

From a strong over 50,000 crore infusion in August, the foreign institutional investors (FIIs) have shown a mild response to the Indian market in September so far. The FIIs have turned net sellers in the Indian cash market with a negative flow of Rs 2,445.82 crore so far as on September 23. It has remained a net seller in the past three days and sold equities worth Rs 461.04 crore on 21st September, Rs 2,509.55 crore on 22nd September a whooping Rs 2,899.68 crore during Friday's sell-off, showed the exchanges data.  

Experts feel the current trend in the US market with rising bond yields hints that FPIs may stop infusing funds aggressively until the situation turns otherwise.  

As per, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, till 23rd September, FPIs have bought equity worth Rs 8945cr through stock exchanges (Source: NSDL).  

However, FPI activity has turned highly volatile with alternate bouts of buying and selling, he said.  

"This month, till 23rd September, FPIs bought on 8 days and sold on 8 days in the cash market. Increased FPI selling has happened in recent days due to rising dollar and rising bond yields in US," he said, underlining that with the dollar index above 111 and the US 10-year bond yield above 3.7 %, FPIs are unlikely to buy aggressively going forward.  

The situation will change if the dollar index and US bond yields decline, he said.  

"In September, FPIs were strong buyers in financials, autos and capital goods and sellers in IT. 
If FPIs again turn buyers, financials will again emerge stronger as financials have strong fundamental support," he added.