Retail investors shouldn't ape FIIs

Since the beginning of this month, foreign institutional investors (FIIs) have been net sellers in the Indian equity market. For a market largely fuelled by the FII movement, it resulted in both the Bombay Stock Exchange’s (BSE’s) Sensex and the National Stock Exchange’s Nifty to lose close to five per cent in the same period. According to BSE data, the net equity sold by FIIs was Rs 3,645 crore between May 2-10. However, in the preceding months — March and April — FIIs were net buyers (Rs 8,399 crore). Although India’s high inflation has been a cause for concern for some time now, the post-Budget buying by FIIs showed that they still expected the corporate sector to deliver. But that didn’t happen. The results for the quarter ended March were not on the expected lines, with corporate margins under pressure. The latest selling spree by FIIs, however, was sparked off after the Reserve Bank of India (RBI) raised interest rates by 50 basis points (bps) rather than the expected 25 bps last Tuesday. Most FIIs have not been enthused by RBI’s stance that it is willing to sacrifice the economy’s growth to curb inflation.