‘Special idiocy’: Shankar Sharma on FII’s sale of Indian stocks

The year proved to be a difficult and unforgettable year for global equities given the many headwinds including rate hikes, the energy crisis, the Russia-Ukraine conflict, continued supply disruptions, REIT outflows, increased inflation, etc. In September 2022, REITs halted their second straight month buying streak and exited 7,624 crores as inflationary pressure accelerated and recession fears intensified in major economies amid tighter monetary policy.

As FIIs continued to sell Indian stocks, well-known Indian investor Shankar Sharma defined the act as the “special idiocy” of selling the “best performing market” in the world.

“If you need proof that Wall Street and the FIIs know next to nothing about investing, look no further than their India sales data for the past 18-20 months. It takes a particular idiocy to sell the most (performing) market in the world,” Sharma tweeted.

In 2022 so far (year-to-date or year-to-date), REITs have removed approximately 1,66,349 crores for stocks alone. Considering other instruments, the overall Indian market recorded an outflow of 1,72,891 crore so far in the current year. Foreign institutional investors (FIIs) remained net sellers in the Indian capital market on Friday as they dumped stocks worth 1,011.23 crore, according to exchange data.

In the first half of the current fiscal year (April-September FY23), FIIs net sold $7.69 billion worth of Indian stocks, becoming net sellers of $900 million in September after buying 7 billion dollars in July-August. As the rupiah has fallen more than 3% since late August to an all-time low of 81.95 towards the end of September, FIIs have become cautious, selling net not only in the spot market, but also massively shorting index futures to hedge their cash portfolios.

Foreign Institutional Investors (FIIs) continue their selling spree and analysts say investors have become deeply risk averse following the US Federal Reserve’s latest rate action and stated bid to fight inflation. The exit from equities is also accelerated by the escalation of the Russian-Ukrainian conflict, pushing investors towards safe havens in dollars. The revision of growth forecasts by the US Fed spooked investors, further adding to fears of recessions.

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