Domestic funds to counter FII flight, keep Nifty steady

IN MAY AND JUNE, FIIs SOLD SHARES WORTH 8,000 CRORE, WHILE DOMESTIC INSTITUTIONS BOUGHT SHARES WORTH 11,000 CRORE

Strong investment flows by domestic investors coupled with increased buying into high-value stocks will help the National Stock Exchange’s Nifty index hold its own despite a gradual withdrawal by foreign institutional investors (FIIs).

In the last two months, FIIs have been net sellers, parting with shares worth ` 8,000 crore, while domestic institutions have been net buyers of shares worth ` 11,000 crore.

The Nifty, a 50-share representative of the Indian securities market, is unlikely to rise sharply if it breaches the 8,450-point level, say derivative analysts.

“If it beats the 8,450 levels it may go up further by about 100 points or so… I would not expect any sharp rises beyond that,” said Sidharth Bhamre, head of research (equity derivatives & technicals). “There are no major positive triggers for the index and there have to be absolutely very strong compelling reasons for anybody to buy beyond 8,600,” he added. The Nifty, a 50-share representative of the Indian securities market, came down marginally by 0.1% to end at 8,444.90 points on Thursday.

While FIIs have been targeting to go back to the safety of a US market once the Fed raises rates, the financial crisis in Greece and its possible adverse fallout on global markets has been speeding FII withdrawals.

“The inflows from domestic funds have also led to a reduction in volatility as local funds typically buy into sector heavyweights such as oil & gas and auto, which will keep the index steady,” said Chandan Taparia, derivative analyst with Anand Rathi Research.