Nifty stays strong amid FII selloff

Over the past seven months foreign portfolio investors (FPIs) have withdrawn about Rs 25,000 crore from Indian equities. In the past, such a large outfl ow would mean a sharp drop in the benchmark Indian stock indices. This time around, however, Indian equities have demonstrated a high resilience with the benchmark Nifty falling by just over 4 per cent in the past seven months. A primary reason being the healthy infl ow from domestic institutions.

A glance at previous instances shows that such an outfl ow from foreign investors resulted in more than 9 per cent fall in Nifty. During the past decade, there have been three instances where FPI outfl ow was been more than Rs 10,000 crore in a span of three-six months and the broader markets fell between 9 per cent and 47 per cent. At present, nearly 64 per cent of the FPI investment in Indian equities is in Nifty stocks. This is true even for the Nifty 100 index. Given the healthy infl ow from domestic institutions, market observers believe that barring a short-term volatility, a possible rate hike by the US Federal Reserve when it meets in mid-December may not have a major impact on the Indian equity market in the medium term.