MUMBAI: Dalal Street investors are likely to face volatility this week with the final phase of India’s Lok Sabha elections ending on June 1. As has been the trend over the past few weeks, domestic institutional investors are seen supporting the market, but foreign investors are likely to continue selling despite a boost from the Reserve Bank of India’s record Rs 2.1 trillion dividend to the government.
Both the Sensex and Nifty hit fresh all-time highs last week. The two indices have been experiencing increased volatility since April 18, the eve of the first phase of the Lok Sabha elections. The volatility index has risen nearly 70% to its highest since September 2022, while the Sensex has risen 2,921 points (4%) and the Nifty 961 points (4.4%) during the period. The Sensex ended the week at 75,410 points and the Nifty at 22,957 points.
Market participants said the recent rally in stocks, despite the wide volatility, was mainly due to strong selling by foreign funds. Foreign portfolio investors have sold equities worth just over 220 billion rupees so far in May, according to CDSL data.
In contrast, domestic institutional investors have added nearly 408 billion rupees net so far this month, as per BSE data, which has led to a rise in key indices, market players said.
The FPI selling, which started trickling in April and spiked in May, was triggered by the massive outperformance of Chinese stocks in recent months, which led to a “sell India, buy China” trade, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services. “Election-related worries could have also influenced the FPI selling,” he said.
However, Vijayakumar feels that things are slowly changing again as market players feel that the ruling Bharatiya Janata Party (BJP)-led government will return to power on June 4. “Also, heavy selling (by FPIs) has eased and they have even turned buyers recently. Going forward, as the election battle becomes clearer, FPIs are likely to start buying in India as they cannot afford to miss out on the post-election results rally. In fact, the rally may even start even before the election results are out,” he said in a note.
Of these, Adani Ports & SEZ and Wipro are likely to be among the large caps to watch next week after the market closed on Friday after the BSE announced that it would include Adani Group in the Sensex index and remove Wipro from it effective June 24. Typically, after such restructurings, investors tend to buy stocks that are added to the index and sell those that are removed.
Ajit Mishra of Religare Broking said the poll results, along with global indexes and the final stretch of earnings season, will determine market trends in the coming days.
Both the Sensex and Nifty hit fresh all-time highs last week. The two indices have been experiencing increased volatility since April 18, the eve of the first phase of the Lok Sabha elections. The volatility index has risen nearly 70% to its highest since September 2022, while the Sensex has risen 2,921 points (4%) and the Nifty 961 points (4.4%) during the period. The Sensex ended the week at 75,410 points and the Nifty at 22,957 points.
Expanding
Market participants said the recent rally in stocks, despite the wide volatility, was mainly due to strong selling by foreign funds. Foreign portfolio investors have sold equities worth just over 220 billion rupees so far in May, according to CDSL data.
In contrast, domestic institutional investors have added nearly 408 billion rupees net so far this month, as per BSE data, which has led to a rise in key indices, market players said.
The FPI selling, which started trickling in April and spiked in May, was triggered by the massive outperformance of Chinese stocks in recent months, which led to a “sell India, buy China” trade, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services. “Election-related worries could have also influenced the FPI selling,” he said.
However, Vijayakumar feels that things are slowly changing again as market players feel that the ruling Bharatiya Janata Party (BJP)-led government will return to power on June 4. “Also, heavy selling (by FPIs) has eased and they have even turned buyers recently. Going forward, as the election battle becomes clearer, FPIs are likely to start buying in India as they cannot afford to miss out on the post-election results rally. In fact, the rally may even start even before the election results are out,” he said in a note.
Of these, Adani Ports & SEZ and Wipro are likely to be among the large caps to watch next week after the market closed on Friday after the BSE announced that it would include Adani Group in the Sensex index and remove Wipro from it effective June 24. Typically, after such restructurings, investors tend to buy stocks that are added to the index and sell those that are removed.
Ajit Mishra of Religare Broking said the poll results, along with global indexes and the final stretch of earnings season, will determine market trends in the coming days.
