DII sold equities worth over $1 billion in the last eight sessions

Data from the National Stock Exchange (NSE) showed that from October 8 to October 20, DIIs were sold ₹9,427.82 crore or $1.26 billion in Indian shares, after net purchases of more than Rs. ₹56,626.66 crore between March and September 2021. So far they have sold Indian shares in October ₹6,414.66 crores. This is despite India’s benchmark Sensex and Nifty indices hitting record highs every day between October 1 and 18. The Sensex rose 5.5% or 3,235 points while the Nifty gained 5.4% or 945 points during this period.

Analysts said domestic investors are worried as valuations of many stocks have reached unrealistic levels due to sharp rally in equity markets. “DIIs are worried about costly valuations amid rising inflationary pressures in the economy, which has started impacting margins of companies. The continued selling of DII can also be attributed to profit-booking after a strong rally, which has boosted the valuations of the market. If stocks are available at fair valuations, DIIs now prefer to hold cash for re-entry, said Satish Kumar, Research Analyst, Choice Broking.

A recent UBS report downgraded Indian equities citing valuation gap with ASEAN markets. Describing India as “extremely expensive”, the UBS report said India’s relative valuation for ASEAN looks “too broad to justify” the two regions with similar growth dynamics and sometimes perceived macro vulnerabilities.

“It is no hidden fact that the market and some stocks/sectors are trading with sky-high valuations like never before. Today is the second day of market decline and we are definitely seeing some fear down the road. Is it DII selling or fear of overvaluation? It is too early to say or draw conclusions. We are always bullish about India.

Analysts said global cues such as bond yields, crude oil, energy and other commodity prices continued to rise and inflation was still a cause for concern, while the macro numbers were not encouraging. Oil prices are up 30% from August lows and multi-year highs. Analysts say that since India is a net oil importer, whose demand is inelastic and imports 84% ​​of its oil requirements, any sustained rise in global oil prices could harm the economy through widening deficits, high inflation and a weak currency. There is a negative setback.

Jigar Trivedi, Research Analyst at Anand Rathi Shares and Stock Brokers, said, “The talk of stagflation comes back after the world’s two largest economies, the US and China, on Monday posted weaker than expected industrial production figures for September. Has been.”