FPIs sell Friday’s bounce, mkts to remain volatile

Foreign portfolio investors (FPIs) capitalized on the bounce, selling shares worth a provisional ₹556.32 crore, while domestic institutional investors (DIIs) bought shares worth a provisional ₹366.61 crore. Analysts expect market volatility to persist next week with the Reserve Bank of India’s monetary policy committee meeting from 8 to 10 August.

The benchmark Nifty and Sensex indices ended up 0.7% each, with the Nifty gaining 135.35 points to close at 19,517 while the Sensex gained 480.57 points at 65,721.25. However, both traded below their peaks of 20 July, with Nifty at Friday’s close trading 2.37% below its record 19,991.85 and the Sensex trading 2.8% below its record high of 67,619.17.

“Domestic equities saw some respite after witnessing selling pressure for three consecutive days on the back of India’s services activity rising sharply to 62.3, its highest in 13 years, fuelled by strong demand,” said Siddhartha Khemka, head of retail research at Motilal Oswal. “Next week would be crucial from the domestic point of view as RBI is set to announce its interest rate decision. Thus, markets are likely to move in a broader range with some volatility. Interest-sensitive sectors are expected to remain in focus.”

Banks and autos are among the rate-sensitive stocks likely to be in focus next week.

“After the sharp selling during the week, the Nifty did manage to reverse some of the losses on the last trading session of the week,” said Jatin Gedia, a technical research analyst at Sharekhan by BNP Paribas. “However, it has closed in the red down for the second consecutive week. The pullback is likely to fizzle out in the zone 19,560-19,600, where resistance in the form of the 40-hour moving average and the hourly upper Bollinger band is placed. Thus, this bounce should be sold into.”

The worrying point for the market so far this month is the selling by FPIs, who have led the latest rally from 20 March through 20 July. The market has risen 19% from a low of 16,828 to a record high of 19,991.85 over the period.

FPIs sold a provisional ₹556.32 crore on Friday, while DIIs purchased ₹366.61 crore worth of shares. So far this month, FPIs have sold shares worth ₹2,034 crore, according to NSDL, after buying shares worth a combined ₹ 1.57 trillion worth of stocks from March through July.

The Reserve Bank of India raised the repo rate by 250 basis points between May 2022 and February this year but kept the policy rate steady in the April and June bi-monthly policy meets.

The central bank rate-setting committee is expected to hold the rate steady this time around too, on expectations of retail price inflation staying within the 4-6% band, but its commentary will be parsed carefully given the Fed’s rate hike to the highest in 22 years last month.

Updated: 04 Aug 2023, 11:50 PM IST