MC Explains | Why FIIs are selling Indian shares and what could reverse the trend (2024)

FAQs

Why is Fii selling in the Indian stock market? ›

Jaykrishna Gandhi, Head-Business Development, Institutional Equities, Emkay Global Financial Services said, “FIIs continue to be on a net selling spree. High volatility, elections uncertainty and optionally on Chinese markets recovery drives this bulk FII selling.”

Foreign investors have pulled out a massive Rs 28,200 crore from Indian equities so far this month, owing to uncertainties about the outcome of the general elections and attractive valuations of Chinese markets.

FIIs generally hold equity positions in foreign financial markets. Due to this, the companies invested in by FIIs generally have improved capital structures due to healthy inflow of funds. Thus, FIIs facilitate financial innovation and growth in capital markets.

The FIIs and its outflow all depends on the return and sentiment of the market. The inflow of investment by them swell up the stock market indices and their exit brings down the market indices and as such creates huge fluctuations in the stock market of host country, resulting in volatility.

Securities and Exchange Board of India (SEBI): SEBI is the primary regulatory authority governing FII in Indian stock market. It is responsible for regulating and supervising securities markets in the country.

During the last fiscal, FDI equity inflows decreased from major countries, including Mauritius, Singapore, the U.S., the U.K., UAE, Cayman Islands, Germany, and Cyprus. However, investments increased from the Netherlands and Japan. Since 2018-19, Singapore has been the largest source of such investments for India.

Since 2018-19, Singapore has been the largest source of such investments for India. In 2017-18, India attracted the maximum FDI from Mauritius.

Yes, Indians can invest in the US stock market. There is more than one way to buy and hold US stocks in your portfolio. Direct equities, ETFs, and mutual funds are just one of the few popular options. You can invest in US stocks in two ways from India – indirect and direct.

The 8735 FII firms registered with the Securities and Exchange Board of India (SEBI) are mainly from the United States (34.53%), followed by Luxembourg (11.51%), Canada (7.49%), Mauritius (6.87%), Ireland (5.80%) and the UK (5.47%) (Fig.

What are the disadvantages of FII? ›

Disadvantages of FIIs

Foreign Control: Questions about foreign control or undue influence over local companies. Speculative Behavior: Potential exacerbation of market fluctuations and asset bubble formation. Short-Term Focus: Prioritizes short-term gains over long-term stability or economic development.

As mentioned above, Section 115AD provides tax on the income of Foreign Institutional Investors from securities or capital gains that arise from their transfer. This section is not applicable for the dividend income that is exempt under Section 10(34) and income from units of mutual fund exempt under Section 10(35).

"FIIs are selling not because of concerns relating to elections but because India is underperforming while China and Hong Kong markets are outperforming," said Dr VK Vijaykumar, Chief Investment Strategist, Geojit Financial Services.

HDFC Bank investors face uncertainty as FIIs and mutual funds sell off shares, triggered by RBI actions and merger fears, despite optimistic outlook from analysts. From investor darling to a hard sell, it has been a frustrating few years for HDFC Bank investors.

Among stocks with high FII holding, those that saw a huge upsurge on the back of hot money from short-term funds would be particularly vulnerable, while companies with strong fundamentals that are backed by long-holding investors, such as pension funds, have relatively lower risk, according to analysts.

Foreign institutional investors (FIIs) do not reside in the same country as the investment. Domestic Institutional Investors (DIIs) are people who live in the same nation as the investment. FIIS could only invest up to 24% of the entire paid-in capital of the company. DII ownership is not subject to such restrictions.

The Ticker screener is a powerful tool that can help you find stocks that FII investors are buying. By using the screener, you can filter stocks according to specific criteria and get a list of stocks that fit your investment strategy.