Foreign Portfolio Investors (FPIs) continued to stay put in the Indian equities market for the week ended March 13, despite a slew of negative global and local cues.
For the week ended March 13, the FPIs bought stocks worth Rs.3,234.7 crore or $518.24 million, according to the data with the National Securities Depository Limited (NSDL).
However, the foreign investors sold stocks worth Rs.957.61 crore or $152.69 million in the week under review.
During the previous week ended March 5, the FPIs had bought stocks worth Rs.6,861.65 crore or $1.10 billion, on the back of post-budget expectations and an unexpected lending rates cut by the apex bank.
The foreign institutional investors (FIIs) along with sub-accounts and qualified foreign investors have been clubbed together by market regulator Securities and Exchange Board of India (SEBI) to create a new investor category called FPIs.
"The FPIs were anxious about the pace of reform process and the on-going parliament session. The FPIs were also cautious about the US non-farm payroll data which has gone up rapidly," Devendra Nevgi, chief executive, ZyFin Advisors told IANS.
The U.S. non-farm payrolls rose 295,000 jobs last month. This data might lead to an increase in US inflation which can make the US Federal Reserve to raise interest rates sooner than previously expected.
With higher interest rates the FPIs are expected to be led away from the emerging markets such as India.
Despite the sharp increase in the U.S. non-farm payroll data for January and a slow rebound in oil prices, the FPIs stayed invested in the Indian markets.
This said the analysts showed that the Indian markets are better placed than their BRICS and Asian counterparts.
However, the U.S. non-farm payrolls data led the benchmark 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) to plunge 945.65 points or 3.21 percent during the weekly trade session ended March 13.
The Indian equities markets’ sentiment again turned bearish as the data on retail inflation for February showed a marginal increase from the previous month. This belied expectations of a rate cut next month.
The Reserve Bank of India is scheduled to announce its first bi-monthly policy review for 2015 on April 7.
The Indian equities markets discounted positive news such as India’s factory output in January which gained momentum. It also overlooked the parliament’s approval to the insurance law amendment bill in the Rajya Sabha, despite opposition protests.
Major trigger in the coming week will be the US Fed meet on March 17 and 18. This meeting will provide the trajectory of the US economy, which will also reveal as to when the rate hike might take place.
"Investors across the world are concerned about the rate hike as it will bring an important change to the cost of liquidity. Hence until this transformation is initiated, volatility cannot be avoided across global equities and currencies," said Vinod Nair, head, fundamental research, Geojit BNP Paribas.
Other major triggers for the FPIs will be the on going budget session and the wholesale price index (WPI) data.
"The focus is largely on the ongoing budget session to deliver post budget measures. We are seeing consolidation with sectoral shifts towards defensives like pharma and FMCG. This trend is likely to stay for some time, as investors look at global concerns like US rate hike and Grexit," Nair said.
Analysts added that the FPIs will also focus on the government’s ability to pass the land and coal bills in Rajya Sabha in the coming days.
"The FPIs in the coming week will keenly follow parliament’s proceedings especially the government’s ability to pass more bills," added Nevgi.