Mkts end week in red on FPI selling; Sensex ends 241 points lower

Cumulative net shorts on Nifty and Bank Nifty Futures by FPIs on Thursday was highest since June 6, 2024

Bearish bets by foreign portfolio investors (FPIs) amid looming uncertainties in domestic and global markets led the benchmark Sensex and Nifty to decline by 2.4 per cent and 2.3 per cent, respectively, at the end of the week on Friday (January 10). The Sensex ended the session on Friday at 77,379, a decline of 241 points, or 0.3 per cent. The Nifty, meanwhile, ended the session at 23,432, a drop of 95 points, or 0.4 per cent. BSE-listed firms' market capitalisation ended at Rs 430 trillion, declining by Rs 5.8 trillion. For the week, the total market capitalisation fell by Rs 20 trillion.

 

FPIs have been on a selling spree since the beginning of the year amid concerns about corporate earnings for the December quarter of the current financial year (Q3FY25) and policy shifts in the US after Donald Trump assumes charge as the President. So far in January, FPIs have been net sellers to the tune of Rs 16,843 crore.

 

FPI outflows began in October, initially in response to China's stimulus measures to strengthen its ailing economy. The victory of Trump in the US elections brought a fresh set of concerns as his policy promises are likely to be disruptive for the global economy, dimming the appeal of other markets. The dollar has strengthened since then, and investors are moving money to safer assets like 10-year US bonds. Since October, the rupee has depreciated 2.5 per cent against the dollar, and the 10-year US bond yield has gone up by 91 basis points (bps). 

 

In October and November, FPIs net sold Indian shares worth Rs 1.2 trillion. Though they turned net buyers in December, the selling resumed at the beginning of the new year.

 

FPIs build bearish positions in the future segment. They increased their cumulative net shorts on Nifty and Bank Nifty Futures to 267,829 contracts on Thursday, the highest since June 6, 2024.

 

"When FPIs are net short in index futures, they either expect the market to go down, or they are shorting in preparation for selling large quantities of cash shares, and selling the index ahead is a way to minimise the impact cost. Trump's presidency is expected to lead to heightened uncertainties, and investors are taking risks off the table in anticipation. The impact of his promised policy measures is likely to be inflationary and may strengthen the dollar, and increase the interest rates in the US. One has to see how much of Trump's rhetorics will translate into policy action,” said UR Bhat, co-founder of Alphaniti Fintech.

 

Andrew Holland, chief executive officer (CEO) of Avendus Capital Public Markets Alternate Strategies, said going forward, markets are likely to see more selling pressure in the short term.

 

"The movements in the market will be more stock- and sector-specific as the companies come out with their results," Holland said.