Nifty looks poised for a bullish run next month. Here’s why
Foreign Institutional Investors (FIIs) have been consistently selling in the Indian markets, withdrawing their funds for 11 consecutive days. In fact, in May 2024 alone, they have pulled out Rs.27,938 crore, marking the highest monthly outflow since January 2023.
But, how are Indian markets affected by this?
Historically, it has been observed that whenever FIIs have net withdrawn for 10 or more consecutive days, the Indian markets tend to fall. Since 2010, there have been 24 instances where FIIs have pulled out money for 10 or more successive days during which the Nifty50 index has fallen 17 times. However, the markets have held the ground considerably this time, falling only 0.80%.
Among these 24 instances, there are 13 instances where the Nifty50 index remained stable, i.e. delivering a positive return or falling not more than 2% despite the relentless FII selling. The table below enumerates these instances, consecutive days of outflows, total outflow, and the Nifty returns during this period.
On further analysis, we find that whenever FIIs have withdrawn for 10 or more days and the Nifty50 index has remained stable, it has delivered an average one month forward return of 2.53%.
Furthermore, since the beginning of the 21st century, there have been four Lok Sabha general elections in India, occurring in the years 2004, 2009, 2014, and 2019. An analysis of the Nifty50 index's performance following the announcement of election results reveals a noteworthy trend. The data, summarized in the table below,
