Rs 1,000 crore a day! Why FIIs are buying Indian stocks non-stop (2024)

Synopsis

On the derivative side, FIIs have covered shorts in the April series after their net short positions touched an all-time high a month ago. Insiders bet that the FII short-covering could continue to Nifty and touch at least the 18,200 mark, where the index may start to look relatively expensive.

Rs 1,000 crore a day! Why FIIs are buying Indian stocks non-stop (1)

After being heavy sellers in 2022 and most of 2023, fickle-minded FIIs have started flirting with Indian stocks once again. To the surprise of many market watchers, the average daily FII buying in the last 10 trading sessions has been more than Rs 1,000 crore.

Since March 28, the net FII inflow on Dalal Street has been around Rs 10,581 crore, shows NSDL data. No wonder, Nifty has also climbed over 5% in the last 9 days.

"India has been one of the best investment destinations for FIIs among emerging markets in April so far. The correlation between FII and the market has become very significant," said Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

On the derivative side, FIIs have covered shorts in the April series after their net short positions touched an all-time high a month ago. Insiders bet that the FII short-covering could continue to Nifty and touch at least the 18,200 mark, where the index may start to look relatively expensive.

"Index valuations have corrected, making it attractive for them to build up their positions. In the past, when FIIs fled, markets were more susceptible to the impact of hot money, but these last few years have seen the rise of the domestic investor acting as a backstop. This is likely to continue to grow as people get more financially savvy. This has also given confidence to the FIIs that market participants have become more sticky," explains Arun Chulani, co-founder, First Water Capital Fund.

The other reason FIIs have started pouring in dollars again in India is that the country's growth story remains intact in a worrisome global macro backdrop.

"While if you look at the US and Europe, it's just not looking as attractive, with rising hikes, recessionary concerns, trade deficits and a creaking financial system," Chulani said.

However, till the time the US Fed starts cutting interest rates again, FIIs are unlikely to make a big comeback on Dalal Street.

Wall Street traders see a 78% probability of the Fed hiking interest rates by another 25 basis points in its May 2-3 meeting as inflation is proving to be stickier than expected.

Rishi Kohli of InCred Alternative Investments expects FIIs to take a cautious stance for a few more months before the pre-election positivity comes into play.

"Overall FII flows are highly correlated to market momentum. So as the upside momentum builds up, they will definitely come back in a big way," he said.

What are FIIs buying?
March month data shows that FIIs bought power, metals, auto and capital goods but dumped oil and gas and IT stocks.

"IT is likely to witness more selling in the coming days since the growth prospects for the segment appear weak, as indicated by the Q4 results of TCS and Infosys. Capital goods, financials and construction-related segments are likely to witness more buying," Vijayakumar said.

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