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Charts & Analysis

11 Consecutive Days of Selling Stocks takes us to First “Sell” Month by Foreign Institutions

Foreign Investors are selling. And continuously selling. (Last week, we saw the biggest FII outflows on a weekly basis in 2014.)

As the markets seem to have rebounded, FIIs have been selling. Now, for 11 days in a row:

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Note: Data till 22nd from SEBI. 23rd is provisional data from the exchanges. In general, the provisional number is around the same ballpark as the actual data which is released a day later by SEBI.

This is the single longest selling streak by FIIs. It’s also taken December to a “sell” month, the first such month in 2014!

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On the less bearish note, if you take 20 day cumulative investments of FIIs in stocks, you have a graph that still shows you +5000 cr. for FIIs investments as of now:

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This tells you one thing – while the 11 day streak is scary, we aren’t really in lousy territory yet: Things could get worse! (Or better: if we don’t see a negative 20 day cumulative, we aren’t really in trouble)

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What to do with this data? Should we run for the hills?

No. The first thing you do is to understand why it’s important.

It’s important because FII flows have carried the market for most of the year. See how that cumulative 20 day figure never went below zero? They just kept buying and buying and buying.

And now, when they stop buying, or heaven forbid, actually start selling, someone’s gonna have to take that slack. And for the last few days, domestic investors (institutions+retail) have picked up their purchases. But that can vanish very fast, because domestic investors have been absent for the most part this year.

Will FIIs come back in Jan after the “holidays”? There’s no hard and fast rule that they will. In fact, in 2007, 2008 and 2009, FIIs were net sellers in January (though they have been net buyers in the last five years in January). So there’s no reason to believe they won’t go back into sell mode in Jan.

Be very careful, but we wouldn’t pull out money unless our stop loss points are hit. In fact, we even bought a stock yesterday in the Capital Mind Premium portfolio.

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  • Ganesh Nayak says:

    There will be lot of domestic demand till March, owing to investments in ELSS for tax saving purposes.. Am I right? Does domestic investment go up during final months of financial year? If so, then FIIs may be strategically selling to book profit as they know domestic investors will lap it up and hence not much effect on stock price

  • esotericBlue says:

    like you have pointed out in a previous article recently, we might already be in the net -ve 20 day cumulative, but for the infosys stake sale on 08dec2014. therefore, we might already be in trouble.
    infosys promoters stake sale only confirms the thought, that promoters themselves felt they might not get a better valuation in quite some time to come.