Foreign institutional investors (FIIs/FPIs) continue to be bullish on India. For the past nine trading sessions this month, they have been net buyers of Indian equities worth Rs 12,838 crore (about $1.95 billion) on stock markets, including net buy of Rs 1,141 crore on Wednesday.
They bought equities worth Rs 5,958 crore and sold stocks worth Rs 4,817 crore, resulting in a net buy position of Rs 1,141 crore, according to provisional data released by the National Stock Exchange (NSE) on Wednesday evening.
On March 14, FIIs were net buyers at Rs 4,088 crore, preceded by Rs 412 crore on March 10 and Rs 488 on March 9. On March 8, the amount shot up to Rs 3,573 crore, mainly due to a huge stake acquisition in Kotak Mahindra Bank by a Canadian investor.
The rupee has been gaining of late, coinciding with the bull run that began first with exit polls predicting the BJP to do well in Uttar Pradesh elections. The landslide victory (312 out of 403 seats) for the party lifted the benchmark indices when markets opened for trading on Tuesday, after remained closed on Monday for Holi.
The NSE Nifty hit a lifetime high of 9,123 on Tuesday before closing at 9,087, while the Sensex closed at 29,442, not far away from its all-time high of 30,024.
The stock market rally and FII purchases are rubbing off on the rupee that has been gaining in tandem. After hitting a 16-month high of 65.42 to the US dollar intraday, the domestic currency closed at 65.69.
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A rising rupee is good for certain sectors of the Indian economy, but for export-oriented sectors like IT, pharma and others, it is bad news.
"Since January 2017, the Rupee has strengthened by 3.6% (till date). The major impact will be felt on the IT companies, which are net exporters especially to US, especially of the likes of Infosys, which has 70% of its billing in US," Sarabjit Kour Nangra, VP Research, IT & Pharma, Angel Broking, said in a note on Wednesday.
The BSE Information Technology index closed 1.81 percent lower on Wednesday, reflecting the pitfalls of a rising rupee. TCS, Wipro and Infosys were among the Sensex losers. Other IT stocks such as Mindtree, HCL Technologies and Tech Mahindra also closed in the red.
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On Wednesday, markets cooled down as investors were cautious ahead of the US Federal Reserve's policy meet where analysts are expecting the Fed to hike interest to a range 0.75 to 1 percent.
It would be interesting to see how the markets open on Thursday. The floor test scheduled at 11 am for the Manohar Parrikar government could influence sentiments. Though the BJP-led coalition is expected to scrape through, there could be a surprise if one of the smaller parties backs out at the last moment.