FIIs BUYING DESPITE CORONA – LOVE OR INFATUATION?

The rating agencies are brutal. The IMF and every single organization worth its name is procrastinating, putting growth estimates are new lows. There is negativity all around and yet, the markets are up. Today, it is down but that is how the indices work, they cannot be up all the time, what goes up, comes down, right?

The layman on the street keeps on asking us in the market – why is the market up when there is nothing to really cheer about? Well, the Cover Feature of Friday explained exactly the reasons why. Yet, more than anything else, apart from retail investors, looks like FIIs have not given up on India despite the downgrades and doomsayers.

At a time when corona is peaking in India, at its worst till now, between 1^st June till 26^th June, FIIs have been more buyers than sellers. During this period, they bought stocks worth Rs.146,455 crore and sold worth Rs.137,025 crore, a net buying of Rs.9430 crore.

While they were net sellers all through March and April, they were net buyers to the tune of Rs.13,914 crore in May. This might have happened as the FIIs were buying to balance their portfolios to adjust to the new MSCI Index.

So what are the FIIs buying and selling. As per data put out by National Securities Depositary Limited (NSDL), till 15^th June, they invested maximum in Banking and Financial services (BFSI) though select private banks and NBFCs saw major reduction. They are also big in consumer, healthcare, telecom and retail. Selling was seen in Auto, ancillaries and metals.

NSDL stated that till 15^th June, FII holding on a sequential basis saw an increase in Bharti Airtel and Zee Entertainment while stocks like Eicher, Axis Bank, ICICI Bank, Grasim and Tata Steel saw a decline.

Whether the FIIs continue with their buying spree or not depends on how India is able to contain the virus in the coming days and most importantly, the shape of the recovery- V or W or Z? With most analysts predicting a V shaped recovery, with repressed demand taking charge once the threat diminishes, FIIs probably know the potential of that bounce back.  

So what do we do? Us and the FIIs are in two completely different situations and it would be foolish for us to merely do what they do. FIIs/DIIs have peer pressures to follow their herd but we do not. Warren Buffett has often talked about the “institutional imperative” where like a herd, investors follow each other, even if they know it is not logical as they do not want to “miss out”; not having the guts to take contrarian calls.

As we say time and again, do your own study, read balance sheets, track stock prices and history and then invest. If this is too much work, like what India is turning to, invest through SIPs in a sound company. That’s the best way ahead – your small money but big institutional buying/selling.