ARE FIIS BACK FOR GOOD?

After being net sellers since March’18, for the first time in five months, FIIs emerged as net buyers in July. Their net buying for the month stood at Rs.178 crore.

Data available for first six days on August shows that they were sellers for two days, on RBI policy day and the next. But till date in August’18, they are net buyers to the tune of Rs.2659 crore.

So after months of being net sellers, has the trend reversed for FIIs? Has their penchant for India returned?

Well, it would be too early to call this a trend. After five months, one single month of net buyers cannot mean reversal of trend. Yes, their buying in first 6 days of August has been encouraging but its too early to call it anything.

But the silver lining is that this buying by FIIs is a good thing though the clouds of global issues of trade war, rising crude oil prices and trend of increasing interest rates has not dissipated.

Interestingly, AceEquity had put out a report, throwing some light on what the FIIs bought into. Their data shows that when the market corrected, FIIs used the opportunity to hike stake in 272 stocks in Q1. Stocks like Ballarpur Industries, National Fertilisers, Jindal Stainless, Oil India, ACC, Care Ratings, Century Enka, Gateway Distriparks, MCX, and Chennai Petro figured high on their shopping spree.

At the same time, during Q1, they trimmed their stakes in companies like Shriram EPC, GTL Infrastructure, IVRCL, Ziocom, Jaiprakash Power Ventures, Bajaj Hindustan, Quadrant Televentures, GTL Ltd, HCC, and Fortis Healthcare.

Today’s news from IMF, calling the Indian economy, “ an elephant that is starting to run” also bodes well – this could be a news which will draw more FIIs. IMF has made a growth forecast at 7.3% in the fiscal year through March 2019 and 7.5% in the year after that. India today accounts for about 15% of global growth.

IMF has flagged risks to the economy - higher oil prices, tightening global financial conditions and tax revenue shortfalls. It has urged authorities to advantage of stronger growth to bring down debt levels, simplify the consumption tax system and continue to gradually tighten monetary policy.

As of now, from where we are standing and looking, markets look good as they are moving in tandem with corporate earnings recovery. Q1FY19 numbers, till date, have overall been good. FMCG sector has shown uptick in volumes; IT sector has benefitted from rupee plunge while private sector banks/NBFCs have delivered performances which have mostly beaten expectations.

Our advice – enjoy the ride as much as you can. If FIIs are back, let us celebrate with the indices hitting new highs day-after-day. More than fundamentals, they are today driven by the falling rupee vis-à-vis the US dollar. So there is some merry after all with a plunging rupee!