The Indian stock market has seen a positive shift with the recent correction in crude oil prices and the return of selective foreign institutional investor (FII) buying. Analysts note a significant trend of reduced FII selling in the latter part of this month. During the past nine trading days, FIIs were buyers on five days in the cash market, marking a departure from the consistent selling seen earlier.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd., attributes this change in FPI activity to two main factors. Firstly, the stabilization and appreciation of the rupee against the dollar have made it less appealing for FPIs to sell. Secondly, volatility in the South Korean and Taiwanese markets has led to FPIs divesting from these regions, potentially redirecting their focus back to India.
The recent drop in crude oil prices below $73 is seen as a significant positive for India, signaling a relief from the Balance of Payments crisis. While the period of continuous FPI selling seems to be ending, analysts caution that it might take time for FIIs to transition into consistent buyers in the Indian market. The optimism surrounding a potential India–US trade agreement has also bolstered investor confidence.
Amidst these developments, Ajit Mishra, SVP Research at Religare Broking Ltd., advises a cautious and stock-specific investment approach due to slowing domestic macroeconomic indicators and ongoing global monetary policy uncertainties. The market sentiment will continue to be influenced by crude oil price trends, geopolitical events in West Asia, and FII flow patterns, with a keen eye on progress in the India–US trade talks.
