Mumbai, December 6. Analysts said on Saturday that this week the continuous fund outflow by Foreign Institutional Investors (FIIs) due to the decline in Indian currency was overshadowed by heavy buying from Domestic Institutional Investors (DIIs).
In the first week of this month, FIIs continued their selling spree and sold Indian shares worth Rs 10,401 crore in the cash market.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services Limited, said that FII selling figures lagged due to consistent strong buying by DIIs. DIIs purchased equity worth Rs 19,783 crore during exactly this period.
Analysts say that the fundamental factors behind FII selling and DII buying are different. Due to a sharp decline of 5 paise against the dollar this year, FIIs are increasing their selling. Meanwhile, DIIs are continuing their buying as they are getting support from continuous fund inflows. They also remain encouraged by strong GDP figures and expectations of future corporate earnings growth.
Meanwhile, sentiment improved in favour of bulls due to a 25 basis point cut in repo rate by the central bank RBI and proposed heavy cash infusion.
The analyst said, “The economy is already in a strong position and providing additional monetary stimulus to the economy at such a time shows the central bank’s bold growth-supportive stance.”
He further said that with growth-supportive fiscal and monetary policies, acceleration in growth momentum and signs of earnings growth pickup, DIIs will continue their buying spree going forward.
Meanwhile, despite strong domestic conditions, capital withdrawal by FIIs is likely to continue in the coming week as well.
Vijayakumar said, “Trends indicate that FIIs will sell at higher levels as they feel valuations are at elevated levels and they can invest money in cheaper markets through selling.”
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