FII share purchases hit four-month high

Ahead of the Union budget, foreign institutional investor (FIIs) share purchases have hit a four-month high so far in July. With seven trading sessions remaining, net purchases could rise to a seven-month high since December’s inflow of ₹66,135 crore, the highest in any month recorded by NSDL.

The net FII inflow stood at ₹32,596 crore in the month through Friday. Monday’s figure was awaited. Coupled with their bullish derivatives positions, they are headed into the event with strong bullish sentiment, said analysts.

Along with the cash purchases, NSE data shows that they were net long index futures (Nifty and Bank Nifty) 358,020 contracts.

“Their (FII) sentiment has improved since the election results and those that were holding back have recently started deploying incremental funds to sectors such as IT and healthcare, which coincides with the budget,” said Jyotivardhan Jaipuria, founder & MD, Valentis Advisors, adding that early bird results of IT companies were better than expected.

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For instance, TCS’ Q1 revenues at ₹12,040 crore beat Bloomberg estimates of ₹11,959 crore while Infosys raised its revenue growth guidance for FY25 to 3-4% from 1-3%.

Indeed, depository data shows FIIs net purchased in the IT and healthcare sectors worth a combined ₹5,143 crore in the fortnight through 15 July.

“The FIIs seem to think that India’s economy has outperformed globally and expect that measures in the Budget will continue to reinforce that,” said U.R. Bhat, co-founder of Alphaniti Fintech.

FII purchases began after the election results of 4 June, with their net purchases in that month amounting to ₹26,565 crore. In April and May of the current year they sold a combined ₹34,257 crore as jitters over the election outcome grew.

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On the day of the election results they were also cumulatively net short index futures by 355,379 contracts, which were covered and fresh bullish bets initiated after the National Democratic Alliance (NDA) won the people’s mandate for a third term.

Other veterans attributed the FII bullishness also to tax structure for markets remaining unchanged.

“Part of their bullishness stems from the belief that there won’t be any change on capital gains treatment,” said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies.

Currently, short term capital gains are taxed at 15% if held for less than a year while long term capital gains above a lakh of rupees are taxed at 10% if held for more than a year.

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