FII holdings at all time high: Why this may spell trouble

Holdings by foreign institutional investors (FIIs) in the Indian market has touched an all-time high of 22.4 percent, data provided by many institutional brokerages reveal. Out of the current USD 220 billion Indian equity free float, 48 percent is from the FII community, CNBC-TV18’s Nimesh Shah.

Also read: Mutual Funds plunge owing to weak market However, it also points out the negative risks for the market in the near-term. With concerns of global risk-off, worries on rupee and likely tightening by the Reserve Bank (RBI), it poses threats of a major impact if these decide to walk out of the bourses. Even in terms of sectors, their presence does raise doubts about its downside risks. Currently, they are present in seven out of the ten sectors. Within them, five sectors have a record high of their holdings. For the last few days and weeks, the key overweight packs for the FIIs have been banks, autos, consumer discretionary and cement. Bank stocks, consumer discretionary names have already been seeing selling pressure. Rotation cycles from overweight to underweight have been taking place too. Brokerages point out that buying has been observed into information technology (IT), rupee oriented stocks like pharmaceuticals and IT. In the assets under management (AUMs) segment, India-dedicated funds have seen a huge shrinkage. These have corrected 50-60-70 percent from the peak.