The entire first week saw FIIs turn buyers in Indian equities. After days of endless selling in December, it was natural to extend the belief into the new year too. Interestingly, the selling trend simply reversed in the new year. But it is early days yet. We need to see how the ‘flows’ trend in the coming weeks. If FIIs stay buyers for a few more weeks, only then can we call the ‘trend’. If that happens, we can safely assume the trend has indeed reversed.
History is an excellent teacher. What does it teach? One should not pre-emptively predict what FIIs will do in a new year. They come back every year with a clean slate and play it afresh. Their need to do something different often drives them to reverse their extreme stance and gradually take a different direction. The reversal initially looks tentative. But time makes things clearer. The coming weeks will give us a clear direction on what FIIs will do this year. Until that clarity emerges, the market will stay edgy and unsure of where things are headed.
The first week has been a good beginning. We need to see if what we saw in the first week sustains in the coming weeks. If buying sustains, we can safely bet on a Pre-Budget rally in Indian equities. That’s something most market players are still not ready to stick their neck out yet.