Reports last week said the Securities and Exchange Board of India (Sebi) is set to impose tightened ultimate beneficial ownership norms for overseas investors with effect from February 1, despite representations from several foreign banks and offshore fund managers to ease the rules.
This triggered a sell-off in largecap stocks with high FII ownership, and among them were HDFC Bank and Reliance Industries.
FIIs net sold shares worth Rs 10,556 crore in the secondary market in just three sessions last week. Last week, January 22 and 26 were public holidays.
Such was the sell-off last week, that it made for one-third of the total outflows seen in domestic equities so far in January.
So far in January, FPIs have net sold shares worth Rs 31,093 crore in the cash market.
Among the largecap stocks, ITC, HDFC Bank, State Bank of India, Bajaj Finance, Asian Paints and Axis Bank shed 2-7% week-on-week.
In terms of sectors, automobiles and media sectors witnessed maximum selling in the first fortnight of January. FPIs sold shares worth Rs 1,630 crore in the automobile sector, and a
little over Rs 1,000 crore in the media sector.
Majority of the selling in the media sector was in Zee Entertainment Enterprises following the fallout of the $10 billion merger deal with Sony Group.
Capital goods, IT, healthcare, and FMCG sectors also saw FII outflows of over Rs 300-600 crore.
On the other hand, financial services, consumer services, power and oil sectors attracted inflows to the tune of Rs 1,000-1,500 crore in the first fortnight of January.
Will outflows continue?
In the run-up to the Budget and amid the ongoing corporate earnings flows, some caution is expected to prevail. Further, rising bond yields is also concerning and could make inflows vulnerable.
“The rising bond yields in the US is a matter of concern and this has triggered the recent bout of selling in the cash market,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services.
“The rally in global stock markets was triggered by the Fed pivot, which saw the 10-year bond yield falling from 5% to around 3.8%. Now the 10-year is back at 4.18% which indicates that the Fed rate cut will come only in H2 of 2024,” he added.
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