FIIs on a Selling Spree: Rs 10,712 Crore in 3 Days Post Budget 2024!

The Union Budget 2024, presented on July 23, 2024, has had a profound impact on foreign institutional investors (FIIs) in the Indian equity markets. Known for their significant influence on market dynamics, FIIs were initially aggressive buyers throughout the first half of July. However, the post-budget period has seen a sharp reversal, leading to a substantial sell-off in various market segments.

FII Selling Spree: The Numbers

The table below provides a detailed look at the FIIs’ selling spree in the cash, index futures, and stock futures segments over the three days following the budget announcement:

(source: NSE)

In total, FIIs sold Rs 10,712 crore in cash, Rs 10,336 crore in index futures, and Rs 10,682 crore in stock futures over just three trading sessions. This sudden sell-off reduced their net monthly purchases from Rs 25,108.69 crore until July 22 to Rs 14,396.99 crore by the end of July 25.

The Underlying Causes

Budget Repercussions

The primary reason for this drastic change in FII behavior lies in the alterations in the treatment of capital gains for listed, unlisted, and compulsory convertible debentures (CCDs) introduced in the Budget 2024. These changes have evidently spooked foreign investors, leading to a quick offloading of their positions in the market.

Market Sentiment

Market participants have observed that FIIs’ sudden shift to net sellers might put additional pressure on large-cap stocks. While domestic institutional investors (DIIs) are buying, their efforts are merely balancing the scales rather than reversing the trend. The valuation discrepancy between fairly valued large-caps and highly valued mid-and small-caps continues to create uncertainty.

Market Outlook

Despite the recent sell-off, the net inflows for July 2024 remain the highest in the last 13 months, highlighting the volatile nature of market sentiment. So far in calendar year 2024, FIIs have net sold stocks worth approximately Rs 1.1 lakh crore.

As we move into the second half of 2024, market participants expect some cooldown in the capital markets. This anticipation is driven by the belief that the current valuation discrepancies will gradually correct themselves, potentially stabilizing the market.

Conclusion

The post-budget sell-off by FIIs has sent ripples through the Indian equity markets, underscoring the significant impact of policy changes on investor behavior. While the immediate future may seem uncertain, the underlying strength of the market, supported by robust DII activity, suggests a potential stabilization ahead.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.