MUMBAI: Foreign fund managers are taking money off the table amid a surge in market volatility due to uncertainty surrounding the outcome of the Lok Sabha elections .
Particularly, it's mutual funds that together got over Rs 20,000 crore of retail money through SIPs in April that are investing aggressively in the stock market, dealers said.
"The FPI strategy is to sell in India, which is expensive, and buy in China which is very cheap mainly through Hong Kong.
"However, Vijayakumar believes this 'sell India, buy China' situation could change dramatically once poll results are known.
"If election results turn out to be favourable from the market's perspective, aggressive buying by DIIs, retail and HNIs can push the market up sharply."
MUMBAI: Foreign fund managers are taking money off the table amid a surge in market volatility due to uncertainty surrounding the outcome of the Lok Sabha elections . At the same time, domestic institutions - mainly mutual funds - have been big buyers on Dalal Street.In addition to poll-related jitters, a recent rally in Chinese stocks may also be pushing foreign investors to shift some funds out of India to China and Hong Kong , market players said.In just six trading sessions this month, FPIs have net sold stocks worth about Rs 17,083 crore, data from CDSL showed. If Friday's provisional net selling figure of Rs 2,118 crore (which will be finalised and published by the depositories on Monday) is also included, the net selling figure is set to be Rs 19,201 crore - translating to about $2.3 billion.Moreover, excluding net foreign fund inflows through the primary market, the net outflow from the cash market will be around Rs 25,000 crore. In April, FPIs recorded a net outflow of Rs 8,671 crore, while the corresponding figure in March was a net inflow of Rs 35,098 crore, CDSL data showed.According to Siddhartha Khemka of Motilal Oswal Financial Services, heavy foreign fund selling and concerns over the outcome of the ongoing general elections are weighing on market sentiment.In contrast to net selling by FPIs, cumulative buying by domestic institutional investors in May stands at Rs 19,410 crore, data from BSE showed. Particularly, it's mutual funds that together got over Rs 20,000 crore of retail money through SIPs in April that are investing aggressively in the stock market, dealers said. Net buying by DIIs in April was Rs 44,186 crore, while it was Rs 56,311 crore in March, BSE data showed.In the three previous Lok Sabha elections, in the two months leading up to polls - and also during the months when elections took place - FPIs were net buyers, the uncertainties that accompany any election notwithstanding.In 2009, when Manmohan Singh-led UPA retained power at the Centre, FPIs were net buyers at Rs 20,117 crore - the highest net inflow figure during and around the time general elections take place.According to V K Vijayakumar, chief investment strategist at Geojit Financial Services, FPIs have turned net sellers in the domestic market because India has been underperforming - Nifty has fallen 2% in the last month - while indices in China (Shanghai Composite is up 4%) and Hong Kong (Hang Seng has risen 11%) have shown strength."The FPI strategy is to sell in India, which is expensive, and buy in China which is very cheap mainly through Hong Kong. The PE ratio in India is more than double that in Hong Kong."However, Vijayakumar believes this 'sell India, buy China' situation could change dramatically once poll results are known. "If election results turn out to be favourable from the market's perspective, aggressive buying by DIIs, retail and HNIs can push the market up sharply."
