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The near-term market construct has turned weak with FIIs turning sellers on rallies. The trend of FII buying in early December has proved to be, as feared, a flash in the pan. Yesterday’s massive FII sell figure of Rs 6410 crores in the cash market indicates that more selling is in store on market bounces. The underlying reason for the FII selling in India is the outperformance of US and the underperformance of India. While the S&P 500 is up 27.5% YTD, Nifty is up only 12% YTD. The fear is that this huge variation in relative performances may continue, given the strength of the US economy and the weakness in the Indian economy. The situation will change if leading indicators in India suggest recovery in GDP growth and corporate earnings in Q3.
The focus of global markets today will be the Fed decision expected tonight. A 25 bp rate cut is priced-in by the market. So,the attention will be on the Fed commentary. A significant trend in the Indian market is the outperformance of the broader market where good results are getting appreciated by the market and there is no concern of FII selling