Foreign institutional investors (FIIs) have accelerated selling in domestic equity markets since last week. In the last five trading sessions, FIIs sold stocks worth Rs 3,000 crore in both cash and derivatives segments, leading to a 5.21 per cent fall in the Sensex.
“A below-par monsoon, panic over swine flu and high commodity prices prompted FIIs, mainly high-risk hedge funds, to pull out some money,” said Deven Choksey, managing director of Mumbai-based KR Choksey Shares and Securities.
Choksey says that some money being pulled out of equity is going into commodity markets. “Globally, commodity markets are witnessing a spurt and offer a better opportunity to make quick returns as equity markets in India have risen faster than elsewhere. However, it will be too early to say if there is a major downside risk due to this,” said Choksey.
Attracted by better-than-expected quarterly results by companies, FIIs had pumped in $2 billion in Indian equities in July alone.
“Some funds were selling as the momentum play for domestic equities in the short run seems to have dried down. However, a week is too short a period to predict a trend,” said Tarun Sisodia, head of research at Anand Rathi Securities. Sisodia said foreign funds were sitting on huge cash piles due to lack of redemption pressure.
Overall, 20 out of 24 major equity, sectoral and fixed-income asset classes tracked by EPFR Global, a fund-flow tracking firm, posted inflows in July and the first week of August.