FIIs follow 'sell in May and go away' mantra ahead of election results with Rs 25,600 crore sell-off
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Synopsis
In May, foreign institutional investors (FIIs) sold Indian stocks worth Rs 25,600 crore, aligning with the 'Sell in May and go away' adage. Increased net shorts in index futures, outperformance of Chinese stocks, and concerns about high valuations contributed to the sell-off.
The FII sell-off is also being attributed to the relatively high valuations and weak earnings, particularly in the financial and IT sectors where foreign investors have a high allocation.
FII activity in June will be crucially influenced by the election results to be announced on June 4th and the market response to that.
If the election results ensure political stability the market FIIs are likely to turn buyers.
Strong GDP growth, manageable inflation, political stability, and the expectation that the RBI is done tightening monetary policy create a positive outlook for the Indian economy, marking a turnaround from their net selling in May, said Vipul Bhowar, Director, Listed Investments, Waterfield Advisors.
Apart from the exit polls, the market on Monday will also likely react to the outcome of the PCE data in the US, Fed’s preferred gauge of inflation, as well as the monthly auto sales numbers. Economic data such as India services and manufacturing PMI will also be released next week while RBI will also announce its interest rate decision on June 7.
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