Uncertain behaviour of FIIs inducing volatility in Indian indices

The Indian benchmark indices have seen significant volatility since the start of the new calendar year amidst geo-political tensions and weak economic growth activities. The street had faced massive uncertainty and negative sentiment for more than a year now. Some of the main reasons for the decline is the economic slowdown, banking NPAs, liquidity crisis, weak consumption trend, and delayed government intervention to come up with fiscal stimulus.

The weak economy saw FIIs taking away large sums to more safer bets, such as gold and bonds. FIIs have been net sellers for most of the FY19 and FY20 (till third quarter), although the trend seem to have changed during the third quarter of FY20. The Muthoot Capital Services saw FII holding change in percentage term as high as 573 per cent over the previous quarter. At the end of Q3FY20, the FII holding stood at 4.65 per cent as compared to 0.69 per cent of total shareholding. In the list of stock with increased FII holding for last four quarters Amrutanjan Health Care, Ujjivan Financial Services, and NMDC were also among the topper in the list in terms of change in FII holding. Such large sum of foreign capital also pushed the price higher. Muthoot Capital clocked gains as high as 30 per cent in the last three months. Amrutanjan, Ujjivan, and NMDC gained 25 per cent, 14 per cent, and 26 per cent, respectively, during the third quarter.

In term of stocks, with decreased trend in FII stake, Sintex and Sarda Energy topped the list. Other players, such as Khadim India, National Fertilizers, and International Paper APPM were a few net sellers. In case of International Paper, the change is due to the overhaul in the management because of foreign promoters after its acquisition by West Coast Paper. The rise in FII holding is certainly positive for the sentiment regarding this stock. Going ahead, its financial result can be expected to be driven forward.