Domestic investors propel Nifty past 16,000, despite sustained FPI sell-off

The benchmark SENSEX and Nifty indices logged new record highs on Tuesday amid favourable global cues and gains in index heavyweight such as HDFC. Positive domestic macroeconomic data and easing of restrictions raised hopes of faster economic recovery, boosting investor sentiment.

The benchmark Sensex hit a record high and ended the session at 53,823, gaining 872 points or 1.65 per cent—most since May 21. The 50-share Nifty index closed above the 16,000 mark for the first time and ended the session at 16,123, gaining 238 points or 1.55 per cent. The index had topped the 15,000 mark on a closing basis on February 8.

Interestingly, the latest up move in the market comes despite sustained selling by overseas investors. Foreign portfolio investors (FPIs) have been net-sellers for 11 out of the 12 straight trading sessions, in which they have yanked out over Rs 10,000 crore. On Tuesday, however, they turned net-buyers, purchasing shares worth Rs 2,117 crore.

Market observers said domestic institutions and retail investor flows over the past month have been instrumental in driving the mark.

“Positive news flow around GST collection and export data has buoyed the market. Nifty’s journey past 16,000 is quite clearly has been led by the retail investors," said S Ranganathan, Head of Research at LKP Securities.

In July, FPIs had pulled out Rs 14,088 crore from the domestic markets—most since March 2020. Mutual funds helped offset the selloff by pumping in more than Rs 12,000 crore.

“Locals are more than absorbing the FPI selling. In July, with the US bond yields coming off there was a growth scare. However, the European economy is starting to look up and is proving to be more of a guiding factor for investors,” said Andrew Holland, CEO, Avendus Capital Public Markets  Alternate Strategies.

The IHS Markit India Manufacturing Purchasing Managers Index, which was published on Monday, stood at 55.3 in July compared to 48.1 in June, the fastest pace of growth in three months. A reading above 50 indicates economic expansion. The central and state governments collected more than Rs 1 trillion in goods and service tax (GST) in July, another sign of the economy picking up amidst easing restrictions.

In global markets, stocks in Europe rose as positive earnings neutralized worries Chinese clampdown on its technology sector. Gains in US and other Asian markets were muted amidst delta variant concerns.

Oil prices fell as virus concerns and slower Chinese economic revival demand outlook. Brent Crude was trading at $73.31 per barrel, an eight-day low.

Investors are waiting for the US jobs recovery to make sense of the recovery and gauge whether the US Federal Reserve will begin its tapering sooner than expected. On Monday, Federal Reserve Governor Christopher Waller said he would back a tapering announcement by September 2021 if the next two months of employment reports show continuous gains.

“Markets touching all-time highs are a combination of various factors including global liquidity, decent operational performance, multiple sectors and various government support schemes. However, one should not get carried away by the buoyancy in the markets as some signs of stress are visible too. Most notable among them are the high provisions done by most banks in Q1FY22. So a sensible strategy is to focus on segments in the markets which are facing genuine tailwinds and are still available at reasonable prices,” Ronak Gala, Fund Manager, AlphaQuest.

Shares of India’s largest housing lender HDFC nearly 4 per cent after its first-quarter profit beat analyst estimates and made a 150-point contribution to the Sensex gains.

The market breadth was positive, with 1,740 stocks advancing and 1,505 declining. Five hundred and thirty-eight stocks hit their 52 weeks high, and 520 hitting the upper circuit. Barring three, all Sensex stocks ended the sessions with gains.

Barring one, all the sectoral indices gained. Telecom and FMCG stocks gained the most, and their indices gained 1.7 and 1.6 per cent, respectively.