After lackluster August, FIIs invest $3.3B in equities this September
Foreign institutional investors (FIIs) have made significant purchases of Indian equities this month, investing a total of $3.3 billion so far. This figure represents a substantial increase from August's total investment of $873 million, according to data from the National Securities Depository Limited (NSDL). The majority of this investment, $2.71 billion, has been directed toward the secondary markets while the remaining $614.23 million was invested in initial public offerings (IPOs).
FIIs favor secondary markets over IPOs
Despite the launch of 10 IPOs worth ₹11,248 crore in September, FIIs have shown a preference for secondary markets. Kranthi Bathini, an Equity Strategist at WealthMills Securities, attributes this trend to the high market volatility. He noted that most IPOs this month were small, except for Bajaj Housing Finance, leading FIIs to focus more on the secondary market where they primarily purchased large caps, banking and engineering stocks.
Investment strategy amid market volatility
Bathini explained that FIIs capitalized on large block deals by promoters and private equity investors, during periods of high market volatility. They adopted a "buy on dips" strategy, which has seen them increase their investments significantly in September, after a period of minimal buying over the past seven to eight months. This shift in investment behavior is notable given that between January-May, FIIs were net sellers, offloading roughly $2.77 billion in equities due to concerns over high valuations.
US Federal Reserve rate cut influences FII behavior
The resolution of political uncertainty and the release of June quarter earnings have led to growing expectations of a US Federal Reserve rate cut. This potential rate cut could benefit many emerging markets, including India, and has influenced FIIs to change their stance. Deepak Jasani, Senior VP - Head Retail Research at HDFC Securities, believes that once the US Fed announces its rate cut decision in the next few days, global markets might experience a temporary peak.
