Moneycontrol Pro Panorama | Why are FIIs rushing to the exit door?  

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Foreign institutional investors (FIIs) are getting out of Indian equities in droves. In the last 47 trading sessions, FIIs had a net sold position in 39. Since October 1, they have dumped shares worth Rs 85,000 crore.

The reasons: rising inflation, prompting fears of quick interest rate hikes by global central banks and the spread of omicron.

Domestic investors seem to be unfazed. So much so that they — both retail investors and domestic institutions — have supported local shares.

But domestic investors are not unaware of the changing scenario. Mutual funds, for instance, were busy churning their portfolios in November. From high beta stocks, these funds moved into the comforts of defensive stocks along with those in the technology space.

Among pharma stocks, their favourites have been Max Healthcare, Laurus Labs and Alembic Pharma. TCS and Infosys were the top picks in frontline IT counters while Zensar Tech and Firstsource Solutions were featured on the list from the mid-cap IT space.

Private sector banks also attracted interest, with nearly Rs 8,000 crore worth of investments in the top three private lenders alone.

In the primary markets, funds were active buying shares in the PB Fintech, Paytm and Go Fashion initial public offers.

Most funds sold their investments in metals. Vedanta and Hindustan Zinc were the most sold stocks. The auto sector had its set of doubters, too: buying was seen in Maruti Suzuki and Mahindra and Mahindra, and selling in TVS Motors and auto component players like Motherson Sumi Bosch.

Several funds sold shares in Zomato, too.

This data show that domestic funds have positioned themselves for the eventuality of a withdrawal of stimulus by the US central bank by buying defensive stocks that would be least affected.

The US Fed’s decision will be known tomorrow. Expectations are that it would speed up the stimulus withdrawal, opening the chances of an earlier than expected interest rate hike in 2022 to curb elevated inflation. This would further increase the exodus of foreign funds from Indian markets, along with other emerging markets.

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Shishir Asthana
Moneycontrol Pro