FIIs extend selling spree as markets start April on a bearish note

Nifty 50 and Sensex extended losses as weak investor sentiment, fuelled by uncertainty over potential tariffs linked to former US President Trump’s policy stance, triggered a broad sell-off across key sectors

Kickstarting the month on a bearish note, foreign institutional investors (FIIs) remained net sellers for the second consecutive session on April 1, offloading equities worth Rs 5,901 crore. In contrast, domestic institutional investors (DIIs) provided some support to the market by purchasing shares worth Rs 4,322 crore, according to provisional exchange data.

During the trading session, FIIs purchased stocks worth Rs 10,480 crore but sold shares totalling Rs 16,381 crore. Meanwhile, DIIs bought equities worth Rs 12,699 crore while selling Rs 8,377 crore. So far in 2024, FIIs have recorded cumulative net sales of Rs 1.46 lakh crore, while DIIs have acquired shares worth Rs 1.92 lakh crore.

Markets slip as investors brace for trade headwinds

Benchmark indices Nifty 50 and Sensex extended their losses as investor sentiment remained weak ahead of key global trade developments. Uncertainty surrounding potential tariffs linked to former US President Donald Trump's policy stance weighed on markets, triggering a sell-off across key sectors.

Technology and pharmaceutical stocks, which have significant exposure to the US market, led the decline. The Nifty IT index dropped 2.5%, while the Nifty Pharma index fell 1.8%. Banking stocks also faced selling pressure, with HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and SBI dragging the Nifty Bank index lower by over 1%. Other sectors, including FMCG, metals, and infrastructure, lost around 1%, while the auto sector dipped 0.5% following mixed March sales figures.

Broader market indices also declined, with the Nifty Midcap 100 and Smallcap 100 slipping 0.8% and 0.5%, respectively. Despite strong gains earlier in the year, analysts caution that stretched valuations could trigger further corrections.

Key factors driving market sentiment

Investors are closely watching potential new trade tariffs and Indo-US trade negotiations, both of which could have significant implications for key sectors. "The IT sector was particularly impacted due to its reliance on US markets, while real estate stocks also fell following an upward revision in Maharashtra’s ready reckoner rates," said Vinod Nair, Head of Research at Geojit Financial Services.

Adding to concerns, rising crude oil prices have contributed to market volatility. However, analysts believe that factors such as an expected recovery in corporate earnings, potential interest rate cuts by the Reserve Bank of India, and moderating valuations could provide long-term stability and support for investors.