Look at highlighted ellipse on Daily Nifty chart- all red candles, starting from 21st January till the end of this week on 29th January. What happened? On Thursday (i.e. 21st Jan), people thought expiry pressures on weekly settlement day. On Friday however, learned experts too didn’t have any plausible explanation. On Monday came the news around noon that on last Wednesday ( i.e. on 23rd January) our army had minor scuffle with chinese soldiers at same spot near Galwan valley where earlier skirmish had taken place few months back. And then experts thought that may be some institutions got the wind of it and hence they sold off as generally happens. So before we went into 26th January holiday it was felt that now news behind sell off is out so markets may rebound on Wednesday. To support this theory were figures from other Asian markets which traded in green throughout their trading sessions. On that day (25th January), FII and DII Cash (Equity) figures were as given below:
FIIs (in Crores) : +1614 (21/01); -635 (22/01);-765 (25/01)
DIIs (in Crores): -1039 (21/01); -1290 (22/01); -387 (25/01)
On 27th January however, Nifty fell again with massive loss of 271 points breaching the crucial psychological support of 14000 at close. Now what happened? And FIIs sold ( net selling) massively (-1688 Crs) with DII figures were mere -3.38 Crs ( net sold only 3.38 crs). Again two theories started doing rounds- monthly expiry and some pre budget selling.
On 28th January, expiry day,Thursday, Nifty fell again. This time, FII and DII figures were:
FIIs (Net sold) : -3712 Crs and DIIs (Net bought): +1737 Crs
So we see that, DIIs bought hugely after a long long time and FIIs sold massively again after a long time and a new story came around- Gamestop saga. Though this Gamestop story had raised its head on Wednesday (since on Tuesday night in US markets it was traded in record volumes, even more than FANG stocks and Tesla, and in process creating losses to the tune of around $12 billion to hedge funds) it was not felt that this could be the reason for consistent FII sell-off.
On 29th, expiry over, markets opened gap- up and it was assumed that all is well now and sell off period is over. But later in day sell off started and at close Nifty was 183 points down at 13,634 and in the evening FII and DII figures were:
FIIs (Net sold) : -5931 Crs and DIIs (Net bought): +2443 Crs
Highest FII net sell off figures for single day since April, I think. And it was agreed that Gamestop losses had triggered a lot of margin calls and this has prompted FIIs to square off their positions in some profit markets and recover funds.
My two bit theory (even though I neither qualify as expert nor a greatly experienced trader) is- This is pre budget sell-off. No? When it is possible to have a pre-budget rally why is it not possible to have a pre-budget profit booking? Earlier the precedent was that till budget markets would rise before budget, albeit marginally on some days, and then book profits on budget day and on subsequent days too if it was a lacklustre budget. This time there is a difference- Covid reality! Every economy is in deep trouble. Governments are moving heaven and earth to raise money from any and every resource. India too is no different. Now we all know that there was a huge discrepancy between stock market and economic reality. Millions of jobs lost, lakhs of businesses closed, many families lost livelihoods but stock market created records everyday. Govt could not give any real stimulus because it doesn’t have any means which means that it will try every trick to raise funds. But what it can do? Can it raise taxes? Absolute NO ( people will cry foul, opposition, whatever is left of it, will create ruckus). Can it privatise few profit making PSUs? Well govt is trying since ages and it is not happening! So what are the other solid avenues? Frankly not many and not substantial capital can be raised through those. Realising this predicament, FIIs started booking profits. I think so and I could be wrong. If I am right, after budget, FII sell off will stop or figures will come down a lot within 1-2 sessions. So despite better than average results by a lot of companies, their valuations are seen considerably high and hence the sell –off. So for us retail traders, there is this advice (if I am allowed to call it that) – stay away on budget day till the end of the day. Let the entire story unfold. See the FII, DII figures in the evening, check option chain, listen to budget gurus and then enter market cautiously on 2nd Feb.
FIIs (in Crores) : +1614 (21/01); -635 (22/01);-765 (25/01)
DIIs (in Crores): -1039 (21/01); -1290 (22/01); -387 (25/01)
On 27th January however, Nifty fell again with massive loss of 271 points breaching the crucial psychological support of 14000 at close. Now what happened? And FIIs sold ( net selling) massively (-1688 Crs) with DII figures were mere -3.38 Crs ( net sold only 3.38 crs). Again two theories started doing rounds- monthly expiry and some pre budget selling.
On 28th January, expiry day,Thursday, Nifty fell again. This time, FII and DII figures were:
FIIs (Net sold) : -3712 Crs and DIIs (Net bought): +1737 Crs
So we see that, DIIs bought hugely after a long long time and FIIs sold massively again after a long time and a new story came around- Gamestop saga. Though this Gamestop story had raised its head on Wednesday (since on Tuesday night in US markets it was traded in record volumes, even more than FANG stocks and Tesla, and in process creating losses to the tune of around $12 billion to hedge funds) it was not felt that this could be the reason for consistent FII sell-off.
On 29th, expiry over, markets opened gap- up and it was assumed that all is well now and sell off period is over. But later in day sell off started and at close Nifty was 183 points down at 13,634 and in the evening FII and DII figures were:
FIIs (Net sold) : -5931 Crs and DIIs (Net bought): +2443 Crs
Highest FII net sell off figures for single day since April, I think. And it was agreed that Gamestop losses had triggered a lot of margin calls and this has prompted FIIs to square off their positions in some profit markets and recover funds.
My two bit theory (even though I neither qualify as expert nor a greatly experienced trader) is- This is pre budget sell-off. No? When it is possible to have a pre-budget rally why is it not possible to have a pre-budget profit booking? Earlier the precedent was that till budget markets would rise before budget, albeit marginally on some days, and then book profits on budget day and on subsequent days too if it was a lacklustre budget. This time there is a difference- Covid reality! Every economy is in deep trouble. Governments are moving heaven and earth to raise money from any and every resource. India too is no different. Now we all know that there was a huge discrepancy between stock market and economic reality. Millions of jobs lost, lakhs of businesses closed, many families lost livelihoods but stock market created records everyday. Govt could not give any real stimulus because it doesn’t have any means which means that it will try every trick to raise funds. But what it can do? Can it raise taxes? Absolute NO ( people will cry foul, opposition, whatever is left of it, will create ruckus). Can it privatise few profit making PSUs? Well govt is trying since ages and it is not happening! So what are the other solid avenues? Frankly not many and not substantial capital can be raised through those. Realising this predicament, FIIs started booking profits. I think so and I could be wrong. If I am right, after budget, FII sell off will stop or figures will come down a lot within 1-2 sessions. So despite better than average results by a lot of companies, their valuations are seen considerably high and hence the sell –off. So for us retail traders, there is this advice (if I am allowed to call it that) – stay away on budget day till the end of the day. Let the entire story unfold. See the FII, DII figures in the evening, check option chain, listen to budget gurus and then enter market cautiously on 2nd Feb.