Dip in Covid cases makes FIIs net buyers

‘Sell in May and go away’ strategy didn’t work well for Foreign institutional investors (FIIs) who have been caught on the wrong foot. The declining trend in daily fresh Covid-19 cases forced FIIs to change their view on India and have turned them into net buyers from net sellers. Over the last eight trading sessions between May 19, 2021, to May 31, 2021, FIIs poured in over $1 billion or Rs 7,311 crore.

However, they were net sellers between April 5, 2021, and May 18, 2021, as they sold stocks worth $2.68 billion or Rs 19,925 crore, amid a raging second wave of Covid-19 showed data released by the market regulator SEBI.

“FII’s strategy of selling in India and moving to other emerging markets like Taiwan & South Korea from early April to mid-May have been proved to be sub-optimal since India has been outperforming most other emerging markets. That’s why FIIs have staged a comeback since mid-May and are buying aggressively in recent days. Progressive unlocking of the economy is likely to improve the prospects of growth & corporate earnings in FY 22. Huge delivery-based buying in frontline stocks like RIL, ICICI Bank, ITC etc indicate a high appetite for these stocks and FIIs might be buying into them and other high-quality stocks with earnings visibility. This trend may continue,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services

Momentous May
While the month of May begin on weak footing but with each passing day things started to improve and making it momentous for equity investors. The market capitalisation of all listed companies crossed the $3-trillion mark while the Nifty50 index too touched a new record high of 15,606. In the month of May alone Sensex has surged 6.5%, increasing investor wealth by Rs 15.97 lakh crore to Rs 222.99 lakh crore at the end of trade of May 31 2021.

“Steady decline in fresh Covid-19 cases, expectations of another set of relief measures, global cues and improved corporate earnings buoyed the market,” said Vinod Nair, Head of Research at Geojit Financial Services.

India the bright spot
The rally in Indian markets is likely to continue with the volatility gauge India VIX of NSE, which measures how much volatility investors anticipate in the next 30 days, is at a 52-week low of 16.77 signaling an uptrend in the markets.

Market veteran Raamdeo Agrawal believes that the benchmark BSE Sensex may touch 2,00,000-mark in the next 10 years. In his note on May 27, he highlighted that the largest democracy, well established federal structure, a huge domestic market that is dominated by youth, rapid digitalisation, robust forex reserves and declining interest rates are some of the favourable factors for the country.

“Stable government in place is an added advantage,” he said, adding Covid pandemic is a temporary blip.

Agrawal said that the Covid pandemic is now a known beat and vaccination marks the beginning of the end. “I expect a K-shaped recovery and larger businesses will recover faster,” he added.

Likewise, BSE chief Ashish Kumar Chauhan eyes $5 trillion m-cap by 2026. In an exclusive interview to Money9, he said, “taking into account that if India were to grow at 7.5% growth rate which it has been in the past, or even add to it the 2.5% US inflation rate, then India may grow at 10% notional growth in dollar terms, then we will reach $5 trillion in five years on basic arithmetic. This is not unachievable or imaginary numbers; it is very much doable.”

Year-to-date flows
If we look at the year-to-date FIIs flow from the beginning of the financial year 2021-22 or April 1, 2021, to May 31, 2021 FIIs have net sellers in the markets pulling out Rs 12,613 crore or $1.68 billion.