Tag: FIIs

Categories
Daily Market Feed Pre Market Report

Results Season Craziness! Can Reliance Save NIFTY? – Pre Market Analysis

Here are some of the major updates that could move the markets today:

Stocks

Infosys reported a profit of Rs 5,945 crore for the quarter, down 3 percent QoQ and cut revenue expectations for the whole financial year. Infy ADR dropped -8.41% in the U.S.

Hindustan Unilever registered an 8% YoY increase in profit at Rs 2,472 crore for the quarter ended June FY24, with growth in all key segments.

Larsen & Toubro said the board of directors will meet on July 25 to consider the buyback of shares

Jio Financial Services(JFL), a subsidiary of Reliance Industries, has been valued at Rs 1.66 lakh crore following an hour-long special trading session at ₹261.85/share. The combined price of is higher than expected.

Major results today: Reliance Industries, HDFC Life, Dodla, DLF, JSW Steel, Ultratech Cement.

What to Expect Today?

NIFTY opened with flat at 19,831 and initially moved down. Being the weekly expiry, index saw volatility but bounced back strongly from 19,760. After this, an intense 230 point rally took NIFTY up to the close at 19,979, up by 146 points or 0.74%. 

BANK NIFTY opened with a small gap-up at 45,725 and looked much more strong. It slowly moved up in the afternoon, but gave a breakout above the all-time high. The index closed at 46,186, up by 517 points or 1.13%.

The general US markets closed mixed, as tech stocks pushed NASDAQ down 2%. The European markets closed higher.

The Asian markets are trading mixed.

The U.S. Futures are trading flat.

GIFT NIFTY is trading down at 19,866, after Infy’s fall.

All the factors combined indicate a gap-down opening.

NIFTY has supports at 19,820, 19,765, 19,740 and 19,725. We can expect resistances at 19,900 and 19,950.

BANK NIFTY has supports at 46,000, 45,900 and 45,800. Resistances are at 46,253, 46,300, and 46,500.

NIFTY has the highest call OI build-up at 20,000. The highest put OI build-up is at 19,800. 

BANK NIFTY has the highest call OI build-up at in the money 46,000. The highest put OI build-up is also at 46,000.

Foreign Institutional Investors net-bought shares worth Rs 3,370 crores. Domestic Institutional Investors net-sold shares worth Rs 193 crores.

INDIA VIX is at 11.78.

Bank Nifty showed consistent strength throughout the day, and once it broke the all-time high gave multiple bursts of strength. Both indices closed at fresh all-time highs. Reliance saw a net positive move after the demerger.

The best moves are the ones without any news or reason. And the time for the looks to have temporarily ended in NIFTY with the starting of results season.

Expect a gap-down opening in NIFTY with Infosys volatility. And expect intraday volatility from Reliance results. If both stocks start moving down, NIFTY would see strong good pull-back towards 19,750 zones.

Bank Nifty option chain remains interesting. With a huge straddle buildup at 46,000, OI indicates that further rally is not optimal. But a breakout, and short-covering can only be expected if another round of fireworks push it above 46,700, which is quite far away.

ICICI Bank, Kotak Mahindra Bank and Yes Bank will be in focus ahead of their results tomorrow.

With it being the monthly expiry series, we can expect some calm before the storm next Thursday. The fresh all-time high made yesterday near 20,000 might be defended till then.

I will watch 19,845 on the downside in NIFTY. 19,920 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YouTube channel. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Daily Market Feed Pre Market Report

Crazy OI in Nifty! Short Covering Loading? Pre Market Analysis

Here are some of the major updates that could move the markets today:

Stocks

Tata Communications reported a 30% fall in net profit at Rs 382 crore for the first quarter ended June. Revenue from operations, however, jumped 11% to Rs 4,771 crore.

Shares of  HUL, Infosys, Havells, and United Spirits will be in focus today as the companies will announce their first quarter results today.

Federal Bank has launched a QIP (qualified institutional placement) issue and fixed Rs 132.59 as the floor price.

What to Expect Today?

NIFTY opened with a gap-up at 19,810 and moved up. The index saw a down-move and there was a recovery in the second half leading to a volatile day. NF closed at 19,833, up by 84 points or 0.42%. 

BANK NIFTY opened with a gap-up at 45,650 and traded in a range of 200 points. There was an up-move at 3 PM and the index closed at 45,670, up by 258 points or 0.57%.

IT moved up by 1.06%. 

The US markets closed in the green. The European markets closed mixed with DAX closing flat and FTSE rallying.

The Asian markets are trading mixed.

The U.S. Futures and European futures are trading mixed.

GIFT NIFTY is trading at 19,835.

All the factors combined indicate a flat opening.

NIFTY has supports at 19,820, 19,765, 19,740 and 19,725. We can expect resistances at 19,850, 19,900 and 19,950.

BANK NIFTY has supports at 45,485, 45,430 and 45,280. Resistances are at 45,715, 45,750, 45,800 and 46,000.

NIFTY has the highest call OI build-up at 20,000. The highest put OI build-up is at 19,800. 

BANK NIFTY has the highest call OI build-up at 46,000. The highest put OI build-up is at 45,500.

Foreign Institutional Investors net-bought shares worth Rs 1,200 crores. Domestic Institutional Investors also net-bought shares worth 2,100 crores.

INDIA VIX is at 11.6.

Though Bank Nifty was range bounded and did not see a strong 3 PM rally, unlike Nifty, the index outperformed Nifty. Reliance saw a big move before the demerger.

There will be a special session to decide the post-merger price of Reliance. Reliance will start trading only after 10 AM. We can expect Jio Financial Services to be listed in the market in four months.

Watch 1674 and 1688 in HDFC Bank. The IT giants consolidated after a fall in the morning. 

Look at the call OI build-up at 19,850 CE in Nifty. It is so huge despite being a strike just 17 points away from the spot. Imagine the magnitude of short covering that could happen if that level is broken.

In case that happens, see where BN can rally to. The index has been suppressed by the option sellers leading to a range-bound day. A move out of the zone could be a big one.

No major data are coming out this week. Let us focus on the Reliance demerger. UK CPI came out slightly better than the estimates.

I will watch 19,765 on the downside in NIFTY. 19,850 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YoutTube channel ‘marketfeed by Sharique Samsudheen’. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Daily Market Feed Pre Market Report

Profit Booking! More Up-move Loading? Pre Market Analysis

Up light arrows and speed lines on dark blue background, copy space composition, growth competition technology concept.

Here are some of the major updates that could move the markets today:

Stocks

ICICI Lombard‘s net profit increased 12% year-on-year to Rs 390 crore for the first quarter ended June.

Himadri Speciality has reported net profit of Rs 86 crore in the first quarter. Revenue from operations, meanwhile, came in at Rs 951 crore.

Shares of Tata Communications, L&T Finance, and Bank of Maharashtra will be in focus as the companies will announce their first quarter results.

What to Expect Today?

NIFTY opened with a gap-up at 19,798 and had a volatile day. The index moved in a range of 200 points and closed at 19,749, up by 38 points or 0.19%. It was long unwinding we saw in Nifty as profit booking kicked in.

BANK NIFTY opened with a gap-up at 45,794 and formed a double top. There was a huge down-move to 45,370 and a bounce that got sold off quickly. BN closed at 45,410, down by 38 points or 0.09%.

IT moved up by 1.06%. 

The US markets closed well in the green. The European markets also closed higher.

The Asian markets are trading mixed.

The U.S. Futures and European futures are trading mixed.

GIFT NIFTY is trading flat at 19,800.

All the factors combined indicate a flat to gap-up opening.

NIFTY has supports at 19,690, 19,600, 19,500 and 19,450. We can expect resistances at 19,820, 19,850 and 19,800.

BANK NIFTY has supports at 45,370, 45,230 and 45,000. Resistances are at 45,650, 45,800 and 46,000.

NIFTY has the highest call OI build-up at 20,000. The highest put OI build-up is at 19,600. 

BANK NIFTY has the highest call OI build-up at 45,500. The highest put OI build-up is at 45,000.

Foreign Institutional Investors net-bought shares worth Rs 2,100 crores. Domestic Institutional Investors also net-bought shares worth 1,300 crores.

INDIA VIX moved up by 4% to 11.7.

That intraday red candle would have been a surprise to the bullish players. The indices moved down all of a sudden. Though there was a recovery move, it was quickly sold off. 

It was a volatile day. However, option buyers who could execute the entries and exits well would have been able to land in profits. Option sellers who could not cut losses quickly would have found it hard to adjust the strikes and end in green.

US Retail sales came out less strong than expected.

It could be a buy-on-dip day as some profits booking has already happened. The candle on Monday was so big that the bulls would protect their positions vigorously.

There are strong support zones in BN and there could be a down-move followed by a recovery trapping the bears.

I will watch 19,650 on the downside in NIFTY. 19,820 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YoutTube channel ‘marketfeed by Sharique Samsudheen’. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Daily Market Feed Pre Market Report

Can We Get a Follow-up? – Pre Market Analysis

Here are some of the major updates that could move the markets today:

Stocks

LTIMindtree has reported consolidated net profit of Rs 1,151 crore for the quarter ended June, which is higher by 4% year-on-year.

Tata Elxsi has posted a meagre 2% rise in net profit at Rs 189 crore for the first quarter ended June. Revenue from operations during the quarter, however, rose 17%.

HPCL said India’s gasoline demand will likely recover from late August, while diesel consumption is expected to stay weak.

What to Expect Today?

NIFTY opened flat at 19,590 and rallied. There was a huge up-move once BN joined and short covering took Nifty to another all-time high. The index closed at 19,711, up by 147 points or 0.75%.

BANK NIFTY opened with a small gap-up at 44,965 and moved down. The index consolidated in a range for a long time and then gave a quick rally. BN closed at 45,450, up by 630 points or 1.41%.

IT moved up by 0.31%.

The US markets closed higher and the European markets closed in the red.

The Asian markets are trading mixed.

The U.S. Futures and European futures are trading lower.

GIFT NIFTY is trading higher at 19,773.

All the factors combined indicate a flat to gap-up opening.

NIFTY has supports at 19,600, 19,500 and 19,450. We can expect resistances at 19,750 and 19,800.

BANK NIFTY has supports at 45,370, 45,230 and 45,000. Resistances are at 45,650, 45,800 and 46,000.

NIFTY has the highest call OI build-up at 20,000. The highest put OI build-up is at 19,600. 

BANK NIFTY has the highest call OI build-up at 45,500. The highest put OI build-up is at 45,000.

Foreign Institutional Investors net-bought shares worth Rs 70 crores. Domestic Institutional Investors also net-bought shares worth 60 crores.

INDIA VIX spiked by 6% to 11.3.

It was a huge rally that happened yesterday and Bank Nifty has covered the entire range of red candles with a single green candle. One day is all it took to kill the bears. Let us see if there is a follow-up.

NF is approaching 20K. As you know, it took a long period for NF to reach 19K from 18K and it seems like NF is compensating for the same.

HDFC has fired up after the results came out better than expected despite a rise in NPA.

Since it is an unexplored terrain, we do not know where resistances in Nifty are. Let us closely watch the resistances in Bank Nifty. 

Looking at the structure, it could be a buy-on-dip day as it is huge buying that is happening.

Traders with bearish view will have to stick to their small SL plan today to avoid extending their losses.

I will watch 19,600 on the downside in NIFTY. 19,800 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YoutTube channel ‘marketfeed by Sharique Samsudheen’. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Daily Market Feed Pre Market Report

Eyes on HDFC Bank – Pre Market Analysis

Here are some of the major updates that could move the markets today:

Stocks

Avenue Supermarts Ltd reported a mere 2% rise in net profit for the quarter ended June to Rs 695 crore, despite a double-digit growth in revenue.

Shares of HDFC Bank, LTIMindtree, and Tata Elxsi will be in focus today as the companies will announce their first quarter results.

Leading broker Angel One has been from onboarding new authorised persons (APs) for alleged failure to monitor the operations of its APs.

What to Expect Today?

NIFTY opened with a gap-up at 19,495 on Friday. There was weakness in the morning due to the long unwinding on Thursday. The market picked up and rallied, especially in the last hour. NF closed at 19,564, up by 151 points or 0.78%.

BANK NIFTY opened with a gap-up at 44,861. It was a down-trending day till 3 PM. There was a huge up-move at 3 PM and BN closed at 44,819, up by 154 points or 0.35%.

IT shot up by 4.5%.

The US markets and the European markets closed mixed with a negative bias.

The Asian markets are trading lower.

The U.S. Futures and European futures are trading lower.

GIFT NIFTY is trading at 19,633.

All the factors combined indicate a flat opening.

NIFTY has supports at 19,500, 19,450 and 19,385. We can expect resistances at 19,600, 19,650 and 19,700.

BANK NIFTY has supports at 44,650, 44,500 and 44,440. Resistances are at 44,950, 45,100 and 45,370.

NIFTY has the highest call OI build-up at 19,600. The highest put OI build-up is at 19,500. 

BANK NIFTY has the highest call OI build-up at 45,000. The highest put OI build-up is at 44,500.

Foreign Institutional Investors net-bought shares worth Rs 2,600 crores. Domestic Institutional Investors net-sold shares worth 800 crores.

INDIA VIX is at 10.7.

We were expecting a tick mark-like price action as we discussed on Friday’s Pre Market Analysis. The reason is that there was long unwinding on Thursday. The market moved exactly like a tick mark but there was a huge up-move at 3 PM.

Bank Nifty saw immense short covering towards the end. Will there be a continuation to the up-move? 45,000 is going to be the testing zone.

India’s Wholesale Price Inflation came out at -4%, better than expected. As we discussed earlier, negative figures are fine for now.

We do not have major events this week from the global front. However, there are results coming out and more importantly, Reliance demerger.

HDFC Bank will announce their results today. Let us watch the stock closely. It is more important this time as the weightage has increased.

I will watch 19,385 on the downside in NIFTY. 19,600 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YoutTube channel ‘marketfeed by Sharique Samsudheen’. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Daily Market Feed Pre Market Report

Is it Time to Exhibit Strength? Pre Market Analysis

Here are some of the major updates that could move the markets today:

Stocks

Wipro reported a nearly 12% year-on-year (YoY) rise in consolidated net profit for the quarter ended June to Rs 2,870 crore. Consolidated revenue increased 6% to Rs 22,831 crore.

Shares of Bandhan Bank, JSW Energy and Just Dial will be in focus today as the companies will report their first quarter results.

Shares of Senco Gold will debut on the exchanges today after a strong response for its IPO.

What to Expect Today?

NIFTY opened with a gap-up at 19,469 and rallied heavily. The index formed a new All-time high and consolidated at the top. There was a huge fall in the second half and the index closed at 19,413, up by 29 points or 0.15%.

BANK NIFTY opened with a gap-up at 44,894 and moved higher. The index faced resistance near 45,100 and started falling slowly. 44,940 was broken and the fall intensified. BN closed at 44,665, up by 26 points or 0.06%.

IT closed 1.75% higher.

The US markets and the European markets closed higher.

The Asian markets are trading higher.

The U.S. Futures and European futures are trading lower.

GIFT NIFTY is trading flat at 19,555.

All the factors combined indicate a flat opening.

NIFTY has supports at 19,360, 19,320, 19,265 and 19,200. We can expect resistances at 19,435, 19,500, 19,550 and 19,600.

BANK NIFTY has supports at 44,560, 44,440 and 44,280. Resistances are at 44,720, 44,950, 45,100 and 45,370.

NIFTY has the highest call OI build-up at 19,500. The highest put OI build-up is at 19,300. 

BANK NIFTY has the highest call OI build-up at 45,000. The highest put OI build-up is at 44,500.

Foreign Institutional Investors net-bought shares worth Rs 1,200 crores. Domestic Institutional Investors net-sold shares worth 2,200 crores.

INDIA VIX is at 10.9.

The story we discussed on the Stock Market Show played out yesterday. We were expecting the put OI to increase with a possible up-move and in case that happens, it would be the perfect recipe for a fall.

There were stiff resistances for Bank Nifty and those played their role. When long unwinding joined, there came the big fall.

Let us see if we get an up-move today because that is what we usually see after long unwinding. At the same time, we cannot expect a very big up-move, unlike it happens during short covering.

The global markets are supportive as of now. Looking at data and cues, there is no weakness. US PPI came out at its best in three years.

I will watch 19,360 on the downside in NIFTY. 19,500 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YoutTube channel ‘marketfeed by Sharique Samsudheen’. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Daily Market Feed Pre Market Report

Global Markets Fire Up! Nifty to Follow or Fall? Pre Market Analysis

Up light arrows and speed lines on dark blue background, copy space composition, growth competition technology concept.

Here are some of the major updates that could move the markets (NIFTY) today:

Stocks

HCL Technologies Ltd reported a nearly 8% year-on-year (YoY) rise in consolidated net profit for the June quarter to Rs 3,534 crore.

Dr Reddy’s Labs announced that its Biologics License Application (BLA) for its proposed biosimilar rituximab candidate DRL_RI has been accepted for a substantive review by USFDA.

Technology major TCS reported a nearly 17% year-on-year (YoY) rise in consolidated net profit for the June quarter to Rs 11,074 crore.

What to Expect Today?

NIFTY opened with a gap-up at 19,508 yesterday. It was crazy price action that we saw in Nifty. The markets moved down and closed at 19,384, down by 55 points or 0.28%.

BANK NIFTY opened flat at 44,888 and exhibited range-bound volatility. The index fell finally and closed at 44,639, down by 106 points or 0.24%.

IT closed 0.71% lower.

The US markets and the European markets rallied.

The Asian markets are trading higher.

The U.S. Futures and European futures are trading higher.

GIFT NIFTY is trading 130 points higher at 19,555.

All the factors combined indicate a gap-up opening.

NIFTY has supports at 19,360, 19,320, 19,265 and 19,200. We can expect resistances at 19,435, 19,500, 19,550 and 19,600.

BANK NIFTY has supports at 44,560, 44,440 and 44,280. Resistances are at 44,720, 44,950, 45,100 and 45,370.

NIFTY has the highest call OI build-up at 19,500. The highest put OI build-up is at 19,300. 

BANK NIFTY has the highest call OI build-up at 45,000. The highest put OI build-up is at 44,500.

Foreign Institutional Investors net-sold shares worth Rs 1,200 crores. Domestic Institutional Investors net-bought shares worth 400 crores.

INDIA VIX is at 10.9.

Though the US markets closed in the green, you can see that Dow Jones had broken the day-low in the second half. The up-move was contributed by the IT stocks mainly.

See how Reliance reversed in the second half yesterday. Keep an eye on Previous-day-low.

HDFC merger will get completed today and there will be volatility because of inflows and outflows.

HCL Tech and TCS have announced their results as mentioned above. See how the stocks perform keeping positivity in the global IT stocks in mind.

There are strong resistances and supports in the market. OI says there are strong resistances rather than supports and this means there could be proper short covering in case there is a good up-move.

I will watch 19,360 on the downside in NIFTY. 19,500 can be watched on the upside.

Make sure that you tune in to The Stock Market Show at 7 PM on our YouTube channel ‘marketfeed by Sharique Samsudheen’. Follow us on the marketfeed app’s Signal section to get real-time updates from the market. All the best for the day!

Categories
Jargons

What are Block Deals in the Stock Market?

You would have often seen the term ‘block deal’ used in our articles. But, are you aware of what it really means? Let’s clear all the doubts one set for all!

Block Deals

A block deal is said to be a trade where more than 5,00,000 shares or shares worth more than Rs 10 crore of a particular company are traded. This should happen as a part of a single transaction. The deal cannot be squared off as we do with our intraday positions. Once done, it cannot be reversed. The price at which this is done should be between +1% to -1% of the current market price or the previous day’s closing price. 

Also, the broker has to inform the exchange of any kind of block deals. The details which have to be passed on to the exchange include the following: 

  • Name of the scrip. 
  • Name of the clients (Buyer & Seller).
  • The number of shares bought or sold.
  • The traded price at which the deal is done.

Stock exchanges are bound to inform the public about the deal with all the details on the same day after market hours. Generally, HNIs (high net worth individuals), mutual funds, financial institutions, insurance companies, banks, venture capitalists and foreign institutional investors (FIIs) are the participants of these block deals. To learn more about FIIs, click here. Promoters of the company can also use this window to buy or sell a major chunk of their share.

Block Deal Timings

As a block deal involves a large number of shares, it is important to allot a particular time slot. Otherwise, a surprising block deal at any time can increase volatility in the market. The exchange has made two slots for any type of block deal to take place.

  • Morning Window (First Session): 08:45 AM to 09:00 AM
  • Afternoon Window (Second Session): 02:05 PM to 2:20 PM
Categories
Jargons

Who are Foreign Institutional Investors (FII)?

Foreign institutional investors (FIIs) are those investors or funds who make investments in assets located in nations other than their own. The term is most commonly used in India, where it refers to outside entities investing in the nation’s financial markets. 

FIIs can include hedge funds, insurance companies, pension funds, investment banks, and mutual funds. FIIs are important sources of capital in developing economies. However, India has placed limits on the total value of assets an FII can purchase and the number of equity shares they can buy.

Developing economies generally provide investors with higher growth potential, as compared to developed economies. Since our country has a high economic growth rate and many fundamentally strong companies to invest in, you can find many active FIIs here. All FIIs in India must register with the Securities and Exchange Board of India (SEBI) to participate in the market.

You can find a list of prominent FIIs here.

Types of Foreign Institutional Investors

Here are the few types of foreign institutional investors in India:

  • Pension funds
  • Investment trusts
  • Banks
  • Mutual Funds
  • Endowments
  • Sovereign Wealth Funds
  • Foreign Central Banks
  • Asset Management Company
  • Insurance/Reinsurance Companies
  • Foreign Government Agencies
  • Foundations
  • University Funds
  • Charitable Trusts

Role of FIIs in the Indian Market:

Foreign Institutional Investors (FIIs) play a vital role in driving economic growth, and this holds true for India as well. With their considerable resources and extensive knowledge, these international entities have greatly contributed to enhancing the value of the Indian market. Their main roles include: 

  • FIIs play a crucial role in boosting capital/stock markets because they not only contribute funds but also have access and expertise around the globe.
  • Their investments improve market liquidity, efficiency, and confidence, which in turn attracts additional investment.
  • FIIs allow domestic investors (including institutional and individual investors) to diversify their portfolios by providing access to a broader range of international investment opportunities. 
  • Additionally, FII investments have reduced the cost of capital, making it simple to obtain affordable international credit and promoting the economy of the nation.
  • FII investments often involve converting foreign currency into local currency. This creates demand for the Indian rupee and affects the country’s foreign exchange reserves, exchange rates, and balance of payments.

Regulations for FIIs in India

The Indian govt allows FIIs to invest in its primary and secondary capital markets only through the country’s portfolio investment scheme. This scheme allows FIIs to purchase shares and debentures of Indian companies on the nation’s stock exchanges. Let us look at some of SEBI’s current regulations on FIIs.

  • The eligible categories of FIIs can now include university funds, endowments, foundations, charitable trusts, and charitable societies that have a track record of 5 years. All these entities must register themselves with a statutory authority in their country of incorporation.
  • Each FII (or sub-account of an FII) can invest up to 10% of the equity of any one company. The overall limit on investments by all FIIs, Non-Resident Indians (NRIs), and Overseas Corporate Bodies (OCBs) has been set at 24%. This limit can be raised to 30% if a company obtains shareholder approval for the same.
  • FIIs can invest in unlisted securities. [An unlisted security is any financial instrument that is not traded on a stock exchange]. Unlisted securities are traded on the over-the-counter (OTC) market (where assets are traded directly between two parties).
  • FIIs are allowed to invest in proprietary funds. Proprietary funds are used to account for a government’s ongoing organizations and activities that are similar to those found in the private sector.
  • FIIs who obtain specific approval from SEBI can invest up to 100% of their portfolios in debt securities (bonds, debentures, etc). Such investment may be in listed debt securities or dated government securities. It is treated to be part of the overall limit on external commercial borrowing.

What are the Disadvantages of FIIs?

  • The economy could experience inflation due to portfolio investment. There can be high demand for local currency due to a significant inflow of foreign institutional investment. As a result, the central bank (RBI) will have to release more money into the economy, increasing money flow and setting the stage for inflation.
  • When FIIs pour a huge amount into a country, they raise the demand for local currency, causing the domestic currency to become stronger. This makes exports expensive and less appealing in the global market, hurting demand and significantly affecting exports.
  • FIIs occasionally solely look for immediate gains. When they pull their investments, banks could face a shortage of funds.

What are Participatory Notes?

A Participatory Note, often referred to as P-Note or PN, represents a financial instrument issued by a registered foreign institutional investor (FII) to cater to overseas investors or hedge funds who wish to participate in the Indian stock markets. The overseas investors need not register themselves with SEBI. Using PNs, financial institutions in a country invest in securities of another country on behalf of their clients. Any capital gains and dividends accumulated through these PNs will go into the hands of clients. It’s worth noting that the majority of these ‘clients’ primarily consist of individual investors.

P-Notes provide quicker means of raising funds for the benefit of listed companies. Foreign investors can easily infuse funds into Indian securities, as they do not have to go through the hassles of government regulations. In fact, the guidelines set by SEBI for investments through PNs are very minimal. These small foreign investors can also remain anonymous.

Concerns over P-Notes:

Various government agencies and financial analysts have stated that this method could be misused by wealthy Indians. P-Notes can potentially be used to bring in significant volumes of foreign unaccounted funds and manipulate stock prices. It can be difficult to track the parties involved in the diversion or misappropriation of these funds. Thus, SEBI began to tighten restrictions and even imposed a ban on PNs in October 2007. This led to the Sensex dropping nearly 8% or 1,744 points on a single day! However, all restrictions were lifted due to concerns about capital outflows during the global financial crisis in 2008. Due to fears of a major market crash, the government is reluctant to introduce a proper ban on participatory notes.

You may Also Like: Who are Domestic Institutional Investors (DIIs)?

Categories
Editorial

Why are FIIs Pushing NIFTY Up?

Firstly, it is important to be aware of who actually FIIs are. FII stands for Foreign Institutional Investors. You can imagine them as a fundhouse or an institution which is registered outside India but is interested in investing in Indian market. They also have to be registered with SEBI, who is the Securities watchdog of India. These FIIs are also known as FPIs or Foreign Portfolio Investors.

Foreign Institutional Investors are pumping a lot of money in India. According to the data, they pumped a whopping Rs 62,951 crore in Indian markets in November 2020. This is the highest amount of money ever invested by the FPI within a month. Out of the total Rs 62,951 crore, Rs 60,358 crore went into equities and Rs 2,593 crore went in the debt segment. In fact, in November, the FIIs turned to be a net seller for just one day. That day too, they were a net seller for only Rs 78.53 crore. In October as well, FIIs were the net buyers as they invested Rs 22,033 crore. Just like you, even we were curious why is suddenly India being chosen as a preferred location to invest? Let’s find out here.

Prime Minister’s meet with the FIIs

It is for the first time FII buying in equities has crossed Rs 50,000 crore in a month. We believe Prime Minister Narendra Modi’s meeting with the FIIs played a major role behind the investment. Early in November, the PM met the world’s 20 largest pension and sovereign wealth funds at a virtual roundtable. The meeting was called the Virtual Global Investor Roundtable (VGIR) conference 2020. In this meeting, PM Modi highlighted India’s potential and its huge untapped market. He assured that his government is committed to making India economically robust. He invited them to be a part of India’s growth story and benefit from it. 

“India’s quest to become AatmaNirbhar is not just a vision but a well-planned economic strategy; a strategy that aims to use the capabilities of our businesses and skills of our workers to make India into a global manufacturing powerhouse. If you want returns with reliability, India is the place to.”– PM Narendra Modi.

This positive commentary coming from a strong leader such as Narendra Modi did have a huge effect. He was successful to lure them to put the massive quantum of money in India. The Prime Minister was vocal that they are looking to back domestic companies to thrive against foreign competition. Also, campaigns such as “Vocal for Local” and “Atmanirbhar Bharat” will suggest people to buy domestic products rather than go for a bit cheaper foreign products. 

The virtual global investor roundtable was attended by the investors from countries like Canada, Korea, US, Europe, Middle East and Australia. Some of the investors which were present are Mubadala Investment Company, Ontario Teachers, Singapore-based GIC Pvt. Ltd, Future Fund, Japan Post Bank and Temasek Holdings. Apart from foreign investors, big Indian industrialists like Mukesh Ambani (Reliance Industries), Nadan Nilekani (Infosys), Ratan Tata (Tata Group) and few others were a part of the VGIR 2020 conference.

A Boost from MSCI 

Morgan Stanley Capitals International (MSCI) is one of the biggest and reputed investment banks and financial services companies in the world. They provide stock indexes, portfolio risk and performance analytics. This index consists of stocks which can outperform and give better returns. MSCI decided to restructure its emerging market index which increased India’s weightage from 8.1% to 8.7%. What does that mean? This means that there will be an indirect inflow of about $2.5 billion (Rs 18,500 crore) to the Indian securities. These are the securities which are a part of MSCI’s Emerging Market Index. The stocks which were added to the list were:

  • Kotak Mahindra Bank
  • Adani Green
  • Apollo Hospitals
  • Yes Bank
  • Balkrishna Industries
  • Trent
  • L&T Infotech
  • MRF
  • IPCA Labs
  • ACC
  • PI Industries
  • Muthoot Finance

When the list was made public, all of these stocks saw a surge in their share prices. Retail investors followed FPIs footpath and started buying more of these stocks, thus, taking the prices higher.

The Great Indian economy

We all know that India introduced one of the most strict lockdowns in the world in March. It led to a horrific yet anticipated 23.9% contraction in Q1 FY21. Since then, the lockdown norms have been eased up by the central government and businesses are allowed to operate. In Q2FY21 (July-September), India’s real GDP contracted by 7.5%. This meant that India entered into a technical recession for the first time in 41 years. Ominous signs, right? Not exactly. What we understand is that people were expecting a contraction of around 10% in the second quarter. A stronger performance has turned the investors, especially the FIIs, bullish on the Indian market. 

They believe when it comes to investing in an emerging country, India might be one of the best options available. Rating agency Moody’s Investors Service has revised its position on the Indian economy. Earlier, they forecasted a slump of 9.6% for this calendar year. As the economy is trying to recover, they have revised their forecast to a contraction of 8.9%. The Reserve Bank of India (RBI) has recently predicted that the Indian economy will stop shrinking from this quarter. They foresee a GDP growth of 0.1% for the quarter ending December. They also expect the economy to contract by 7.5% in FY21 rather than 9.5% which they anticipated earlier. A strong rebound in the economy is what people are expecting. Whether it would be a K-shaped, V-shaped or U-shaped recovery is a different topic to discuss.

The Way Ahead

The rally which seemed to hit its peak in November has carried on in December as well. On all the first 13 days of this new month, FIIs have been a net buyer each day. They have invested more than Rs 25,000 crore till 13 December alone. With this pace, November’s record could be broken easily. Coronavirus cases in India kept decreasing in November. This positive news, along with the opening up of the economy gave confidence to the investors. Also, one point to note that India is a very young country demographically. Statistically, we have seen coronavirus to be more deadly for older people. There might be a case where the foreign investors are banking on the younger population to come out better in this pandemic. With all these reasons in place, we believe that investors might keep flowing in the money as they hope to profit from India’s recovery in the pandemic.