A slowdown in the pressure of selling by FIIs cheers the stock markets in July.

Selling by FIIs slows down in July 2022.

Good news for stock market investors

The year 2022 has witnessed heavy selling by the FPIs so far. In 2022 the selling by FPIs in the cash segment has been a massive Rs 2,83,405 crores till June’22. The selling by the FPIs in the cash segment for Jan’22 to June’22 is given below:-

Good news for stock market investors

This stock market update has given hope to the investors and given some breathing space to the Indian stocks. The selling by the FIIs has been absorbed by the retail investors and the DIIs so far. The selling pressure subsided in July’22 so far, and this has enlightened hopes amongst the investors. This subsiding of selling pressure by the FIIs has been characterized by the slowing inflation concerns on the back of some fall in the crude oil prices. The coming down of crude oil prices has created hopes in the investors that inflation is slowing down.

Related: 5 Reasons for unprecedented FPI selling in recent months

Reasons for hope

The selling pressure by the FPIs has reduced in July’22, and so far, the FPIs have sold only a little over Rs 4,000 crores. The reason for the slowing selling is that the inflationary concerns are coming down. The crude oil prices have reduced, and this has given hope to the investors that inflation is slowing. It is still very early days, and if the inflation is slowing down needs to be watched.

If inflation comes down, there is a lot of hope as the increase of interest rates by the central banks will subside. The increase in interest rates has added pressure on the stock markets in the last few months, and the returns this year have been negative. Central banks globally have been hiking the interest rates, and the RBI has hiked the Repo rates by 90 bps in 2022. The interest rates were hiked in May and June this year.

RBI has maintained that fighting inflation is its main goal of the RBI. RBI is comfortable with 4% +/- 2% inflation. This year the inflation has been over the RBI tolerance limit of 6%. If inflation drops below 6% again, the stock market returns can be great as most of the concerns will subside.

Related: Top 10 factors that affect Indian share market

Conclusion

The Indian markets have been under pressure in 2022 due to inflationary concerns. FIIs have been withdrawing from the Indian markets every month this year. This onslaught stopped somewhat in July 2022, with the FPIs withdrawing only Rs 4,000 crores. If the FPI selling subsides, the Indian markets are expected to gain and give good returns. The coming down of the crude oil prices and the hopes that the inflation will subside is providing a cushion to the markets in July. It is still early days, and it needs to be seen whether inflation subsides or not. Also read about the 3 factors that are driving the current market volatility in India.

NEWSLETTER

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