FIIs help December recovery as they form buyers, Rs. 14,435 crore equity purchases

Foreign institutional investors (FIIs) returned as buyers in December after heavy selling in October and November, fueling the market’s recovery from the November lows, with exchanges trading Rs. 14,435 crore equity purchased.

According to NSDL data, total FII purchases including exchange purchases and investment through ‘primary market and others’ category as of December 13 stood at Rs. 22,765 crores was reached. This strong buying activity has fueled the rally in large-cap stocks in particular, with the banking and IT sectors seeing significant gains.

“Even though FIIs have been buyers in December, they have also been big sellers on some days. This suggests that at higher levels, they may again turn to sellers as Indian valuations remain relatively high compared to other markets,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

A rising dollar is another concern that could prompt FIIs to sell higher, Vijayakumar added.

However, it cannot be denied that the FIIs turned net buyers after the selling period and provided much needed momentum to the market, boosting investor sentiment and pushing the indices higher.

The recent boom in the Indian market has also been driven by positive political developments, recovery in corporate stocks, increased foreign investment in primary and secondary markets and broad sector partnerships.

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“The Reserve Bank of India (RBI) has increased liquidity by reducing the Cash Reserve Ratio (CRR), which is likely to boost market sentiment. Additionally, India’s Consumer Price Index (CPI) inflation eased to 5.48% in November from 6.21% in October, boosting investor confidence and raising hopes of a possible monetary policy easing by the RBI, said Vipul Bhovar, senior director of listed investments at Waterfield Advisors.

Historical data shows that the Nifty index has closed higher in December 71% since 2000, with significant gains recorded in 2023 and 2020.

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