FIIs have been consistent sellers since early April having sold equity worth Rs 16,500 crore during April 1 and May 7. They have been selling in India due to the COVID second wave concerns and moving to safer markets like South Korea and Taiwan, Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) A volatile week but bulls remained in control of D-Street pushing Nifty50 back above 14,800 levels. What led to the price action?
A) Bulls have been in control during the last week, in spite of a flood of negative news on the pandemic front. The market has been surprisingly resilient and consolidating around Nifty 14,800 levels.
This resilience is surprising since we know that Q1 FY22 GDP and earnings growth will be impacted by the lockdowns, curfews, and restrictions on economic activity.
Actually, we are having a sort of mini lockdown now since 13 states are in full lockdowns.
The market’s logic is that the second wave that has triggered this lockdown will peak around mid-May and the gradual opening up after that will lead to a rebound in growth.
This 'hope trade' is the fodder for the bulls. There is a good possibility of this scenario playing out. Importantly, the continuation of the global bull run is strong support to our markets.
Q) How do you see action in the markets week? Which are the important levels that one should track going forward taking view of the FII and DII activity.
A) The market action in the coming week is likely to be influenced by the COVID fresh case numbers. If there is an alarming increase in the numbers, there can be selling pressure by the FIIs, and markets can correct.
On the other hand, if the fresh cases numbers show a declining trend, markets are likely to consolidate further and then slowly move up. There will be stock-specific action in response to Q4 results.
FIIs have been consistent sellers since early April, having sold equity worth Rs 16500 crore during April 1 and May 7. They have been selling in India due to the COVID second wave concerns and moving to safer markets like South Korea and Taiwan.
But FII selling has been absorbed by DII plus retail buying, which explains the resilience of the market.
Q) Sectorally, the metal index outperformed for yet another month while Consumer durable was the laggard. What led to the price action?
A) Even though metal stocks have run up too much too fast, the sector is likely to be resilient since the metal sector appears headed for a long bullish phase after a long period of stagnation. But, profit booking is likely in the short run since investors are sitting on bumper profits.
Consumer durables, particularly autos have been hit by the lockdown. The prospects for consumer durables in May is bleak. But declining stock prices may offer buying opportunities.
Q) After a flat April, ‘Sell in May Go Away’ echoes in the mind of investors. History suggests that bulls have mostly remained in control. Do you think May of 2021 will be different?
A) These are abnormal times and therefore the normal trends need not apply. But selling and profit booking can happen in May. For all categories of investors - institutional as well as retail - partial profit booking is advisable since valuations are high and uncertainty is rising.
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