With FIIs being net sellers to the tune of Rs 2,094 crore on Thursday and over Rs 25,000 crore for entire June (including from debt markets), what can the Indian markets expect going forward?
Withdrawal FEARS
The US Federal Reserve Chairman Ben Bernanke has indicated in as many words that the inevitable withdrawal of stimulus will happen sooner than expected. “If the incoming data support the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases,” he said at a press conference on Thursday.
According to market experts, the outlook for FII flows would remain muted in the short-term but should look up in the long-term once the risk of rupee slide and volatility is contained.
Motilal Oswal, Chairman and Managing Director, Motilal Oswal Financial Services, said: “I don’t foresee any severe selling pressure from FIIs as the Government is seen acting on containing gold imports, bringing down the current-account deficit as well as on the FDI policies. The RBI too is carefully watching the rupee situation and if it falls further we could see it intervening by going in for a rate-cut as well.”
According to Sudhakar Ramasubramanian, MD, Aditya Birla Money, FIIs being in risk-off mode is likely to continue till the time currency remains tight.
“A daily depreciation of 2-3 per cent in the rupee and an increase in crude by 15 per cent in the last two days would stoke inflation further. Till rupee stabilises to around Rs 57-58 levels, we would remain cautious. Presently market is not reacting to fundamentals but to liquidity and flows.”