The Rupee fell to an exchange rate of 62.91, which is nearly the lowest rupee value in the year after a few odd days in early Jan.

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This is a secular move across all currencies. In Jan 2015, the dollar went up against all other currencies and that’s why the rupee fell. This time, it’s not so = check out the upward move in the last few days across every single currency, meaning they have appreciated against the rupee:

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10 Day Cumulative FII Volumes Are At A Low

Foreign Investors are selling. Both debt and equity, it seems. Instead of looking at daily data, which is very squiggly, we add up data for the last 10 days and we can get the total amount invested in the past 10 days, as a rolling window. This data looks like this:

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Now remember that this data will lag the Nifty (i.e. their selling will reflect after a few days). Still, we see that the last move up (from 8300 to 8800) was not really a lot of FII driven buying. This fall though seems to be the FIIs exiting.

Also they have sold over 1500 cr. in the equity markets today, and we’ll know about debt markets tomorrow.

Our View

Long positions need to proceed with utmost caution. Large caps and small caps have diverged – the small cap index made a new high as the Nifty refused to touch a new high. This indicates institutional consolidation or selling, just as retail investors buy (they operate in the small caps and mid caps).

That is not a good thing: Consolidation in the Large Caps, Accumulation in the Midcaps.

If the market breaks its previous low, I think we’ll get a longer sustained downtrend. A 10% fall for one, and will we see 20%?

FII selling seems to just be triggering this fall, and there’s a lot of profits waiting to be booked.

 

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