Global cues, FII funds to weigh on Indian equities
new delhi — Global cues and direction of foreign fund flows are expected to affect key equity indices this week, market observers said.
“With earnings season almost over, markets will now focus on global risks and political developments from the US, valuations, domestic flows and stock- or sector-specific developments,” Devendra Nevgi, chief executive of Zyfin Advisors, said.
“On a year-to-date basis, India has performed well, led by strong liquidity and reforms. But in the past one to three months, the inflow of foreign institutional investors [FIIs] has reduced which may impact the performance in the near future,” said Vinod Nair, head of research, Geojit Financial Services. “FIIs have started to pull out money from the domestic market — till date, the outflow is ₹76.3 billion.”
Figures from the National Securities Depository revealed that foreign portfolio investors divested equities worth ₹68 billion, or $1.06 billion, during the week ended August 18.
Provisional figures from the stock exchanges showed that FIIs sold stocks worth ₹58.9 billion, while DIIs bought scrip worth ₹43.7 billion during August 14 to 18.
The Indian rupee, which closed the week ended August 18 on a flat note at 64.14 to a US dollar, is expected to be volatile and can potentially erode investors’ risktaking appetite.
“Over the near term, we need to watch how risk aversion plays out in equity markets. Volatility has begun to inch higher in stocks and bonds, which is negative for risk assets like equities,” Anindya Banerjee, deputy vice-president
76B ₹ has been pulled out by foreign institutional investors YTD
for currency and interest rates with Kotak Securities, said.
“Positioning remains stretched as speculators and investors are overly long in risk assets such as EM equities and DM equities. When positioning remains so stretched, any excuse can trigger an unwind. It can be as innocuous as the Korean peninsula or another of Trump’s foot-in-themouth moments.”
“Therefore, over the near term, we remain cautious on the rupee. Over the next week, a range of 63.90 and 64.30 can be seen in the pair,” Banerjee added.
On technical levels, the underlying trend in the NSE Nifty remains bearish with a downside expected.
“Technically, while the Nifty has pulled back this week, the underlying trend remains down,” Deepak Jasani, head of retail research, HDFC Securities, said.
“The downtrend is likely to resume once the immediate support of 9,783 points is broken. Pullback rallies could find resistance at 9,866 points and 9,933 points.”
Last week, key equity indices — the Sensex and the Nifty50 — made gains on the back of easing global geo-political tensions and healthy buying in realty, metal and FMCG stocks.
Consequently, the 30-scrip Sensitive Index (Sensex) of the BSE gained 311.09 points or 0.99 per cent to close at 31,524.68 points.