Why FII’s Selling Just Before Election Result?

FII (Foreign Institutional Investors) are taking money out from the share market in large quantities making the market volatile. The share market is currently affected by the FII’s withdrawal of the money. While Elections are said to be the main reason behind it. Speculations are being made that the market will catch the bull run after the election result. Apart from that, we have seen an increase in investment from DII (Domestic institutional Buyers). Why is FII selling before the election results? Let us find out the top three reasons behind FII’s sudden selling.

FII (Foreign Institutional Investors) are selling before the election results in high quantity. The main reason behind this bulk selling is said to be the uncertainty related to the Lok Sabha election results. Anything can happen. FII is currently offloading Rs. 22,858 Crores in May 2024 six sessions. While the DII are the only buyers in these sessions, they are not able to counterbalance the FII’s outflow.

If we talk about the figures, the FII’s total net outflow is Rs. 22,858 Crores. While investments made in this six-session by the DII are Rs. 16,700.19 Crores. This is the total figures including equity and debt. In the equity market, FII has purchased Rs. 11,353.03 Crores of equities. While it sold Rs. 18,347.89 Crores of equities. The difference between the purchase and sale is making an outflow from the market of Rs. 6,994.86 Crores.

If we talk about some of the major reasons, The high US bond yields are the main reason. It was the starting point when the FII started selling the Indian market equities and debts. While the other major reason is the rise in India’s VIX Index. It is the real-time market index that shows the market’s expectations for volatility in the next 30 days. Thus the index is currently showing more than 70% volatility. It makes the investors fearful about their investments. The VIX index is highly volatile because of the Lok Sabha elections 2024.

The market will take some time to reach normal after the election results. Before the elections, the situation does not seem to become normal before the results. Thus, Lok Sabha Elections 2024 results will be out on 4 June 2024. Nifty 50 is currently going at Rs. 22,590.75. It is 0.45% high today. It opened today at Rs. 22,568.10. The index has already its lower boundaries of the upper channel. The market expects to fall after the election results as well.