foreign institutional investors: Bad cop! Powell makes FIIs drive out of Dalal Street in reverse gear – Blue Barrows

Foreign institutional investors or FIIs, who turned net buyers in the Indian equity market in July after heavy selling for 9 consecutive months, were forced to backtrack in September following increased fears that the US Fed’s rate hikes will end up triggering a recession.

NSDL data shows that FIIs sold Indian stocks worth around Rs 7,624 crore in September, pulling Sensex down by over 2,100 points or 3.5% during the month.

FIIs have been selling continuously in the Indian market prompted by the outcome of the US Fed meeting on September 21. On Friday, when RBI Governor Shaktikanta Das’ pragmatic approach was cheered by the market leading to an over 1,000-point rally in Sensex, FIIs sold stocks worth over Rs 1,500 crore as Jerome Powell’s hawkish-than-expected tone kept on playing on their minds.

Domestic institutions or DIIs, on the other hand, were net buyers to the tune of Rs 3,245 crore on the last trading day of the month.

So far in the calendar year, FIIs have sold Indian stocks worth over Rs 1.68 lakh crore. July and August have been the only two positive months with domestic bulls holding the fort. Sensex delivered positive returns in both the months.

Derivatives rollover data for October series shows that FIIs have significantly added fresh shorts in both stock and index futures, which indicates their bearish stance on Nifty.

FIIs are net short by $1,506 million vs net short position of $427 million on the previous expiry. FII ownership is now at multi-year lows. “Persistent selling since mid-2021 (except for the past few weeks) implies that as a cohort it has missed out on one of the best performing large equity markets in the world,” global brokerage Morgan Stanley said in a report.

Changing the rules of the game are domestic and retail investors, who have now emerged as a major countervailing force for the FII ‘hot money’. From July 2021 to June 2022, FIIs sold equities worth over Rs 4 lakh crore through stock exchanges but the market wasn’t affected much as DIIs bought equities worth around Rs 3.28 lakh crore.

When FIIs try to buy 5% of the stocks they sold, prices surge making their re-entry to the market expensive, said Dr VK Vijayakumar of


“It is important to understand that retail/DIIs are the dominant players in the market now. The share of retail investors, DIIs and FPIs in the daily cash market volume in the exchanges are 52 per cent, 29 per cent, and 19 per cent, respectively. Retail/DIIs are in a formidable position unlike in the past when FPIs used to call the shots,” he pointed out.

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