 "FIIs get ready for possible Fed jolt")
Brokers said these investors had sold Nifty futures in most of June so far, partly as insurance against their domestic share portfolios and to make a quick buck if markets slide.
FIIs have net-sold index futures in 10 out of the 11 trading days (till Monday) amounting to a little over Rs 6,300 crore. Provisional data show they sold index futures today to the tune of Rs 320 crore. In the cash segment, FIIs have net-sold stocks worth about Rs 1,375 crore so far in June (till Monday). Today, they sold shares worth Rs 597 crore, according to provisional data.
“Most of the index selling is hedging against their cash positions, rather naked short positions,” said Siddarth Bhamre, head-derivatives, Angel Broking.
Though the extent of selling so far in June pales in comparison to the net purchase figures of Rs 82,300 crore during January-May, analysts said the slowdown in FII inflows and selling, coupled with short positions, showed the nervousness among overseas investors about the Fed meeting outcome.
Most economists expect the Federal Open Market Committee to spell out a road map for slowing down its third round of the gigantic bond purchase programme known as quantitative easing 3 (QE3), which was aimed at pumping money into the country’s banks. A portion of the funds flowed into riskier emerging market equities and bonds in the last couple of years. The general consensus on Wall Street is that the Fed could start unwinding the QE3 by end of 2013.
“If the Fed signals that it is tightening its monetary policy, it will certainly unnerve markets. Though there would not be any sizeable outflows, the absence of inflows could lead of a correction,” said Sujan Hajra, chief economist, executive director-institutional equities of broking firm Anand Rathi Securities. “But any correction is unlikely to be prolonged.”
Brokers said the lack of inflows from FIIs would be enough to result in market declines because domestic institutions, too, have been sellers, while retail investors have stayed away from the market. Domestic institutions have net-sold to the tune of Rs 46,000 crore so far in 2013.
“The bigger problem for Indian markets would be lack of buying by FIIs rather than selling. If FIIs sell and result in the market tanking, local investors would come in to buy and support the market. But, if markets stay where they are, it is going to be more painful,” said the head of equities of a European investment bank.