The markets have been struggling for the past 6 sessions and the investors have turned significantly cautious. Both the Sensex and Nifty are off 10% from their recent highs. Though the sectoral indices saw some bounceback on November 14, the Sensex is nearly 8000 points down from its all-time highs while the The Nifty settled around a key support level of 23,500 in trade today.
Over Rs 23 lakh crore worth of investor wealth has been wiped off in the past few sessions. One of the reasons for this sharp cut has been the huge outflow in the past few weeks. For November so far, FIIs have already sold over Rs 27,000 crore.
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FII selling not a big worry
The question that’s worrying most investors now is how much more would the FIIs sell and how this would impact markets. Dhiraj Relli, Managing director of HDFC Securities, is not worried. He pointed out that domestic investors have the wherewithal to absorb this selling spree by the FIIs, “We have seen unprecedented outflows from FPIs in October and in the last 25 odd years similar kind of 10 billion outflows were seen only twice. Once in 2009 and in 2020 during Covid-19. If you look at now, the market has been very resilient. FPIs definitely will find US more attractive after Trump’s victory so they may not invest as much in EMs. We may continue to see outflows for some more time. But it is adequately compensated by Indian investment community. That’s where we see good inflows from SIPs. So domestic institutions are able to absorb this FPI selling with ease.”
Is earnings the big worry?
Earnings appear to be the bigger cause for concern as most companies reported muted results in Q2.
According to Deven Choksey, managing director of DRChoksey FinServ, “One of the reason for the fall is de-rating of the stocks after the second quarter earnings announcement but the earnings performance is unlikely to cause any permanent damage. In my viewpoint, the second half of the financial year would be significantly better compared to the first half of the financial year, and that’s where probably, I think you are likely to see the earnings recovering back,” and this he believes will give opportunity to investors to buy stocks at lower levels.
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