According to V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, there has been a sudden change in the strategy of Foreign Portfolio Investors (FPIs) starting January 17. FPIs have become massive sellers in the cash market, having sold equities worth Rs 24,147 crore in three days from January 17 to 19.
Two main reasons have been cited for this shift in FPI strategy. First, the rise in US bond yields, with the 10-year yield increasing from 3.9% to 4.15%, has triggered capital outflows from emerging markets. FPIs have been significant sellers in other emerging markets like Taiwan, South Korea, and Hong Kong. Second, the high valuations in India provided FPIs with an opportunity to use the less-than-expected results from HDFC Bank as an excuse to engage in massive selling. Additionally, FPIs increased their short positions.
Despite FPIs pushing the market down, their selling has been countered by buying from Domestic Institutional Investors (DIIs) and individual investors. FPIs have been buying IT stocks this month, particularly after the management commentary following the Q3 results of IT companies indicated optimism about a revival in demand for the sector.
(With Agency Inputs)
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