Domestic investors propel Nifty past 16,000, despite sustained FPI sell-off

India’s benchmark indices logged new record highs on Tuesday amid favourable global cues and gains in heavyweight stocks such as HDFC. Positive domestic macroeconomic data and the easing of Covid-19 restrictions further boosted investor sentiment.

The Nifty50 index closed above the 16,000 mark for the first time, ending the session at 16,123 with a gain of 238 points, or 1.55 per cent. The index had topped the 15,000 level on a closing basis on February 8. The Sensex closed at 53,823, gaining 872 points, or 1.65 per cent — the most since May 21.

Finance Minister Nirmala Sitharaman said stock market volatility had reduced considerably since March 2020. “The stock markets are, therefore, likely reflecting the future growth prospects of the Indian economy given the support provided by the policy response of the government,” she said.

The latest surge in the market comes despite sustained selling by overseas investors. Foreign portfolio investors (FPIs) have been net-sellers in 11 of the past 12 trading sessions, in which they pulled out over Rs 10,000 crore. On Tuesday, however, they turned net-buyers, purchasing shares worth Rs 2,117 crore.

Market observers said domestic institutions and retail investors had been instrumental in driving the markets over the past month.

“Positive news flow around GST (goods and services tax) collection and export data has buoyed the market. The Nifty’s journey past 16,000 has clearly been led by retail investors,” said S Ranganathan, head of research at LKP Securities.

In July, FPIs had pulled out Rs 14,088 crore from the domestic markets — the most since March 2020. Mutual funds helped offset the sell-off by pumping in more than Rs 12,000 crore.

“Locals are more than absorbing the FPI selling. In July, with the US bond yields coming off, there was a growth scare. However, the European economy is starting to look up and is proving to be more of a guiding factor for investors,” said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies.

Stocks in Europe rose as positive earnings neutralised worries about the Chinese clampdown on its technology sector. Gains in the US and other Asian markets were muted amid delta variant concerns.

Oil prices fell as virus concerns and a slower Chinese economic revival clouded the demand outlook. Brent Crude was trading at $73.31 per barrel, an eight-day low. Investors are waiting for the US jobs recovery to make sense of the recovery and gauge whether the US Federal Reserve will begin its tapering sooner than expected. On Monday, Federal Reserve Governor Christopher Waller said he would back a tapering announcement by September 2021 if the next two months of employment reports show continuous gains.

“Markets touching all-time highs are a combination of various factors, including global liquidity, decent operational performance, multiple sectors and various government support schemes. However, one should not get carried away by the buoyancy in the markets as some signs of stress are visible too. Most notable among them is the high provisions done by most banks in Q1FY22. So a sensible strategy is to focus on segments in the markets which are facing genuine tailwinds and are still available at reasonable prices,” said Ronak Gala, fund manager at AlphaQuest.

Shares of India’s largest housing lender HDFC rose nearly 4 per cent after its first-quarter profit beat analyst estimates and made a 150-point contribution to the Sensex gains.

The market breadth was positive, with 1,740 stocks advancing and 1,505 declining. As many as 538 stocks hit their 52-week high, and 520 hit the upper circuit. Barring three, all Sensex stocks ended the session with gains.

Barring one, all the sectoral indices gained. Telecom and FMCG stocks gained the most, and their indices gained 1.7 and 1.6 per cent, respectively.