Indices Hit New Highs, Yet Struggle to Maintain Gains Amid FII Sales
India’s equity indices reached remarkable new heights but ultimately closed lower on Monday, facing persistent challenges as foreign institutional investors (FIIs) continue to sell off. The market’s recent peaks were tempered by a weaker rupee and uncertainties surrounding the anticipated US-India trade deal.
In early trading, NSE’s Nifty climbed by 0.5% to a record 26,325, only to settle at 26,175, marking a decline of 27.2 points or 0.1%. Likewise, the BSE Sensex soared to an all-time high of 86,159 before ending 64 points lower at 85,641. This pattern has become increasingly common, with Nifty failing to hold gains after attaining new highs for three consecutive sessions, also mirrored by the Sensex.
“The market struggles to maintain its momentum due to two major factors: uncertainty surrounding the trade deal and the expectation of a 25-basis point rate cut from the RBI, which may increase currency pressures,” explained Shrikant Chouhan, head of Equity Research at Kotak Securities.
The rupee reached a record low of 89.79 against the dollar ahead of the RBI’s monetary policy meeting, potentially prompting additional foreign outflows and hindering Nifty’s ability to sustain its new high levels. On Monday, foreign portfolio investors sold shares worth ₹1,171 crore, while domestic investors purchased ₹2,559 crore. Notably, foreign investors had net sold shares worth ₹11,593 crore in November, a stark contrast to the ₹919 crore in purchases recorded in October.
Ankit Soni, assistant vice president at Mirae Asset Sharekhan, indicated that the market’s inability to maintain gains is attributed to ongoing FII sales and a depreciating rupee, exacerbated by delays in the US-India trade deal. He noted, “Current buying by domestic institutions or retail investors is being offset by foreign outflows, lacking the necessary follow-up buying.”
In the broader market, Nifty Midcap 150 fell by 0.1%, while Nifty Small-cap 250 rose by 0.2%. Asian markets reflected mixed results, with China advancing by 0.65%, while Japan and South Korea saw declines.
As analysts foresee continued high volatility, Rajesh Palviya, head of Technical and Derivatives Research at Axis Securities, noted significant call writing in the 26,200-26,400 range is hindering Nifty from closing above these levels meaningfully. Ruchit Jain, vice president at Motilal Oswal Financial Services, highlighted that the support zone for Nifty has now shifted to 25,800-25,900. While new highs are being made, this trend is likely to persist unless we see signs of broader market recovery or rupee strength,” he added.
In conclusion, the indices have demonstrated their potential to reach new highs but face substantial obstacles in maintaining those levels, primarily due to FII sales and external market factors. Investors need to remain vigilant as market dynamics continue to evolve.