Weakness persists on FII selling

Mkts | Fears of FII funds flowing into Chinese stocks looming large

* Undercurrent doesn’t favour aggressive buying, immediate rally unlikely 

* China’s ‘clean relationship’ initiative—between government and business—may attract FIIs, means more pressure on Indian markets  

* Money flowing into Chinese stocks expected through the Hang Seng Exchange since the Hang Seng index PE is around 12 as compared to 18.5 one-year forward PE in India  

* Small and mid-cap stocks continue to lag due to apprehensions about premium valuations

* Largecaps are fairly valued today, calibrated buying recommended

* Mcap of BSE-listed cos falls below `400 lakh cr-mark, Sensex lost over 10,000 points since its peak of 85,978 on September 27, 2024.

Palazhi Ashok Kumar mumbai

Equities closed marginally lower on Tuesday as weakness persisted on FII (Foreign Institutional Investors) profit-booking and continuous pressure on rupee. Key indices BSE Sensex and NSE Nifty closed lower as corporate earnings continued to hit investor-sentiment. Market had taken a breather on Monday. But failed to continue the marginal recovery on Tuesday as the 30-share BSE Sensex closed 29.47 points lower at 75,967.39. Intra-day, it recorded a fall of 465.85 points to 75,531.01. The NSE Nifty fell 14.20 points and closed at 22,945.30.

According to Dr. V K Vijayakumar, chief investment strategist at Geojit Financial Services, the weakness in the market persists despite the mild recovery witnessed on February 17. FIIs may continue to sell as news flows are not positive.  “The US market continues to be strong, and may attract more capital flows to US markets as compared to other markets. A new development is from the Chinese authorities indicating a new perspective regarding the Chinese government’s approach to Chinese businesses. 

“President Xi has proposed a “clean relationship” initiative between government and business. It is regarded as a favourable development for reviving the already struggling Chinese economy from the fall out of the crisis in its real estate sector. If the Chinese government’s new initiatives attract positive responses from the FIIs—that means more bad news for Indian markets. 

“More money will flow into Chinese stocks through the Hang Seng Exchange since the PE of the Hang Seng index is only around 12 compared to the 18.5 one-year forward PE in India. Since largecaps are fairly valued in India, calibrated buying in this segment can be done. But the market construct doesn’t favour aggressive buying,” Dr VKV added.

Vinod Nair, head of research, Geojit said: “The domestic market has experienced both ‘profit-booking’ and ‘bottom-fishing’ amid persistent concerns over FII outflows and pressure on rupee. Small and mid-cap stocks continue to lag due to apprehensions about premium valuations. Meanwhile, India’s trade deficit has widened beyond expectations, driven by rising imports due to depreciating domestic currency and surging commodity prices.”  Nair said, currently, investors are exploring bargain-hunting opportunities due to deep correction in price, but modest earnings growth and global uncertainties are constraining momentum.”

FIIs had offloaded equities worth Rs 3,938 crore on Monday. On Tuesday, FIIs’ trading data shows a buy value of over Rs 14,537 crore and sell value of over Rs 9,751 core, recording a positive net value of Rs 4,786 crore. However, FII’s buying data remained much lower than market expectations. Asian markets, Seoul, Tokyo, and Hong Kong recorded gains while Shanghai and European markets settled lower. Global oil benchmark Brent crude rose by 0.73 per cent to US$ 75.77 a barrel.