Foreign institutional investors (FII) remained net sellers for yet another week, to the tune of Rs 4,362 crore, following strong dollar and US bond yields post the Fed’s aggressive policy tightening. As a result, they are net sellers on a monthly basis as well, to the tune of Rs 2,445 crore so far in September, against purchases worth more than Rs 22,000 crore the previous month.
If the US dollar index and US 10-year treasury yield remain strong, then experts feel that Foreign Portfolio Investors (FPI) are unlikely to buy aggressively going forward. Hence, the movement of both these factors will be crucial for FII flows in the coming weeks.
On the other hand, Domestic Institutional Investors (DII) were net buyers the past week, to the tune of more than Rs 1,100 crore, but they are net sellers (nearly Rs 1,900 crore) so far in September.
5) Global economic data cues
US GDP numbers for the quarter ended June (Q2-CY22) will be keenly watched by global investors, given the Fed's aggressive approach towards controlling inflation.
US GDP has contracted by 1.6 percent in Q1-CY22, while for Q2-CY22, the fall in growth was revised to 0.6 percent against 0.9 percent contraction in advance estimates in July.
"The direction of the Fed's rate hikes in the future may be influenced by this figure, therefore international markets will be closely monitoring it," Apurva Sheth, Head of Market Perspectives at Samco Securities, said.
Oil prices remained volatile and corrected further last week as the USD hit more than 20-year highs, and recession fears mounted due to aggressive policy tightening by central banks globally, raising concerns about the outlook on oil demand.
International Brent crude futures ended at $86.15 per barrel, the lowest since January 2022, down 5.7 percent for the week. The prices have dropped 30 percent in the last three-and-half months.
Further fall in oil prices is expected to support the RBI commentary as we are among the largest oil importers, experts said. Hence, market participants will be closely watching this space.
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