Stock market crash: Why are FIIs selling Indian equities aggressively? Are Lok Sabha elections to be blamed?

livemint.com:

Stock market crash: In May, FPI selling in the cash market has been relentless. FPIs have been sellers on every trading day and have sold equity for ₹24,975 crores. This has contributed to the underperformance of the Indian market.

DIIs have been buying, but HNI and retail investors appear to be in a wait-and-watch mode due to new developments on the political front. The lower turnout in the first three phases of elections has led to debates on its impact on the fortunes of the ruling dispensation and the Opposition alliance. There are claims and counterclaims.

The fact is that nobody knows the likely impact. Electioneering and speeches by the leading leaders have become more intense and shriller. Some political pundits are of the view that the certainty surrounding the election results, which was very high when the elections began, has declined now.

Since the market had largely discounted an NDA/BJP victory, the new development is causing some jitters contributing to the market weakness. It is important to understand that sustained FII selling has nothing to do with uncertainty relating to the election results. It has more to do with the relative valuations of stock markets and the sharp differences in recent market performance.

During the one-month period from April 11th to May 11th the Indian stock market underperformed. While the S&P 500 and Stoxx 50 appreciated by 1.04 percent and 1.07 percent during this period, Nifty fell by 2.06 percent. Significant outperformance was registered by Shanghai Composite and Hang Seng indexes: Shanghai composite appreciated by 3.96 percent while Hang Seng spiked by 10.93 percent during this period.