From Buyers to Sellers: Will FII’s influence the FY24 market performance; details inside

The Indian market and its participants always give weightage to FII investment in the market and consistently observe whether they are net buyers or net sellers. In this article, we are going to observe FII investments for each financial year starting from FY99 and try to draw conclusions from it.

Let’s observe the data presented in a tabular format:

 According to the data, in FY09, for the first time, FIIs became net sellers by selling Rs 45,811 crore in the market. If we examine this closely, Rs 47,706.2 crore of equities are sold in the equity market, with the remainder in the debt markets.

During the same period, the market turned bearish and generated a negative return of 36.2%, reflecting the global financial crisis and economic challenges, primarily stemming from the 2008 market crash.

In FY10, FIIs turned aggressive and registered an inflow of Rs 1,42,658 crore, which was 3.11 times what they had sold during the previous financial year. The market also welcomed FII investment and generated an impressive return of 73.75% during the same period, compared to the negative return of 36.2% the previous year.

This aggressiveness continued into the next year, FY11, where they invested Rs 1,46,438 crore, which was 2.7% more than the inflows of the previous year. However, the market only generated a return of 11.14% during the same period.

The second instance when FIIs became net sellers was in FY16 when they were the net sellers by selling Rs 18,175 crore in both equity and debt. The market generated a negative return of around 9% during that year.

Also read: What is FII & where can foreign institutional investors invest in India?

In FY2017, they invested Rs 48,411 crore, which was 2.7 times what they had sold the previous year. Moreover, the market generated an 18.6% return during the same period.

Furthermore, in FY19 and FY20, FIIs were net sellers, selling Rs 38,929 crore and Rs 27,529 crore, respectively. Surprisingly, most of the selling came from the debt market, not the equity market. This might be the reason that despite FIIs being net sellers, the market gave a positive return, generating around 15% during FY19.

On the other hand, most of the selling came from debt, with buying seen in the equity market. However, the market generated a negative return in FY20, with COVID-19 being the major reason for the market’s fall.

In the very next financial year, FY21, the market gave an impressive return of 71%. Moreover, FIIs made a record-breaking investment of Rs 2,67,099.99 crore, an all-time high since FY99.

Going forward, the same trend of selling in back-to-back two years was seen in FY22 and FY23, where FIIs were net sellers, primarily selling in the equity market. The market generated a positive return of 19% in FY22 but a negative return of a mere 0.61% in FY23 as it performed in the last back-to-back years when FIIs were the net sellers.

Now, the most important and interesting thing to understand is that whenever FIIs become net sellers, the very next year, the market has performed remarkably, except in FY17.

Moreover, they have already invested more than what they sold in the last two financial years, FY22 and FY23, as of yesterday. 

Will this be the year when the market will again cheer and provide a handsome return, following the historical trend observed in this article? Well, for this, we need to wait patiently and observe the market for better clarity.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.