Key Points

The change in FII strategy in India which began in April continues in May. FIIs were continuous sellers in India in the first three months of this year.

The big selling began in January (Rs 78,027 crore) when the dollar index peaked at 111 in mid-January. Thereafter, the intensity of selling declined. FIIs turned buyers in April with a buy figure of Rs 4,243 crore.

“In May up to 30th, FIIs bought equity for Rs 18,082 crore through the exchanges, as per NSDL data. Global macros like declining dollar, slowing US and Chinese economies and domestic macros like high GDP growth and declining inflation and interest rates are the factors driving FII inflows into India,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

FIIs have been buyers in autos, components, telecom and financials in the first half of May.

According to Ketan Vikam, Head of Sales at Almondz Institutional Equities, any further spike in the US bond yields, equity markets could face downward pressure as risk-off sentiment could come into play and drive investors to prune their holdings.

“However, FIIs till now have maintained a bullish stance in Indian equities despite lacklustre trend in the previous week. This offers solace as any optimism in global markets could see the trend continuing in June,” he added.

The RBI's credit policy on interest rates decision on Friday will be keenly watched as any further cut in policy rates would keep markets in good stead in the medium term, said analysts.

- IANS