The highlight of the market action on October 28 was undeniably the FII buying seen. Foreign institutional investors net bought Rs 10,339.80 crore in Tuesday’s trade. This is the maximum that FIIs net bought in a single day since June 26. Not just that, if we look at the October flows, they are on track to end at 3-month highs. So far in October, FIIs bet bought Rs 10,040 crore. This is the first time they turned net buyers since June and the inflow thus far this month is higher than what they net bought in June. Is it just a blip or a definitive change in trend?
Market veteran Ajay Bagga pointed out that the current buying is as a result of a combination of 3 factors, including “1. Some large buys of blocks in select counters; 2. Expiry-day, like in June expiry, position was taken, but we saw selling the next day. We have to watch for the next few days; 3. The long-short ratio of FIIs improved from 8:92 to 20:80 over the October series.”
Let’s take a look at the big catalysts that impacted FII sentiment
Fed rate cut hopes
The two-day FOMC meeting between October 28-29 is underway. US Fed Chief Jerome Powell is expected to announce a cut in rates amid the US Government shut down. US saw its first rate cut of 2025 in September. Concerns about the labour market slowdown was highlighted as a key concern for the US economy.
Deven Choksey, managing director, DRChoksey FinServ pointed out that “a 25 bps cut in US Fed rate is expected. This will impact the US Dollar and greenback may then find its way into metals and equity markets including EM.”
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments added that “the Fed is expected to cut rates by 25 bp. More important than the rate decision will be the Fed commentary on quantitative tightening.”
Rupee Vs Us Dollar
The Dollar in fact has garnered significant strength in the last 1 month. The greenback gained over 1% against a basket of currencies in the last 30 days and the Dollar Index is significantly off the 2025-lows, trading around the 98 mark. The rupee too has seen soe strength in the past few session.
Bagga added that there are signs that “confidence among investors is returning. The rupee gained in October and earnings bottomed out in the September Quarter. All contributed to positive net inflows by FPIs. However, we have to wait and see if it’s an expiry play like in June or if it will sustain beyond that.”
Earnings optimism
Corporate earnings are beginning to offer some support to the markets. Most market stakeholders pointed out that they believes the earnings have bottomed out in the September quarter. So far the numbers have been inline with estimates and management commentaries point to pick up in the second half.