Foreign Institutional Investors (FIIs) have sold shares worth ₹28,671 crore through the stock exchanges in August. However, they have also bought shares worth ₹12,367 crore in the primary market, resulting in a net sell-off of around ₹16,304 crore for the month, according to data from NSDL.
This mixed behavior—selling in the stock market while buying in the primary market—can be explained by differences in valuations. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FIIs are selling stocks in the exchange due to high valuations but are buying in the primary market where valuations are lower.
During the first half of August, FIIs sold ₹14,790 crore worth of financial stocks and were also bearish on sectors like metals, services, construction, and automobiles. On the flip side, they were buying stocks in the healthcare (₹3,462 crore), consumer services (₹2,196 crore), FMCG (₹1,785 crore), and power (₹1,169 crore) sectors.
According to Vipul Bhowar, Director of Listed Investments at Waterfield Advisors, FIIs are selling banking shares due to concerns over slow deposit growth and challenges in the first quarter of FY25, such as shrinking margins, worsening asset quality, and rising provisions, particularly in credit cards, personal loans, and agriculture portfolios. The sell-off in metals and mining stocks followed a Supreme Court decision allowing states to levy taxes and royalties on minerals, increasing operating costs for miners. Some FIIs have also booked profits in auto stocks, which have performed well in recent quarters.
Looking ahead, analysts believe FIIs might show renewed interest after US Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole, where he hinted that future interest rate cuts might align with market expectations, reducing the chance of significant rate cuts.
Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS, commented that while the era of high interest rates is ending, it’s unlikely we’ll return to an environment of ultra-low rates any time soon.
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