1. Benchmarks running out of steam? FIIs may agree

Benchmarks running out of steam? FIIs may agree

The equity market has lost close to 0.9% from a new record high attained in late November.

By: | Mumbai | Updated: December 4, 2014 5:18 AM

The equity market has lost close to 0.9% from a new record high attained in late November. The benchmark indices however, may be looking for another 1% of downward move indicates the trend in FII activity in index futures.

In 2014, at least on three instances as the 30-share Sensex scaled a new peak, a slow-down in FII purchases of index futures was accompanied by a simultaneous fall of about 2.2% on average in the Sensex.

graph-fii

A similar pattern appears to be emerging again given that, since November 28, 2014 the net FII purchases of the index futures as represented by its 21-day moving average have slowed from R423 crore to R182 crore. If one considers the pattern witnessed in 2014, this means the Sensex may be looking for another 1% correction towards 28,000-28,060 range.

Between May and September 2014, similar slow downs in buying activity led to an average correction of about 540 points on the Sensex. Market participants however point out that generally as the indices observe strong moves, the institutinal players like to hedge their bets. As a result, they tend to sell more of index futures even as their cash positions in the spot markets remain on the buy side.

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