REIT appetite for stocks turns bullish and pumps to ₹5,000 cr in July

The end of July brought bullish sentiment to the equity market as foreign portfolio investors (REITs) finally became net buyers for the first time this year. REITs’ appetite for equities increased in the last week of July as they continued to be net sellers of other capital market-related instruments. After six consecutive months of exits, REITs have pumped out almost 5,000 crore in the Indian stock market. This would be the first positive sign after a heavily bear-dominated first half. Both Sensex and Nifty 50 benchmarks rallied significantly as recession fears fade and investors hope inflation will subside in the coming months as trend signals for monetary policy tightening ease .

According to NSDL data, in July REITs were pumped 4,989 crores in the equity market, while they were net sellers in the debt market with an outflow of 2,056 crore. REITs have also been removed 785 crores and 176 cr of the debt-VRR and hybrid market.

As a result of the above, the REIT’s overall investment in the Indian market amounted to 1,971 crores in July. This includes equities, debt, debt-VRR and the hybrid market.

In June 2022, foreign investors withdrew from around 50,203 crore from the shares – the highest monthly outflow in 2022 so far. In the first quarter of FY23 (April through June), REITs removed 1,07,340 crore in Indian stocks. Meanwhile, in the first six months of 2022 (January – June), the equity outflow is around 2,17,358 crore per REIT.

Due to the inflow in July, the equity market saw some recovery in outflows from REITs. So far, the output of REITs is around 2,12,369 crores this year.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “NSDL data as of July 29 shows REITs turned bullish for the month,” adding: “REITs were bullish for 9 days in July. . This reversal of REIT activity is one. important factors driving the market rally in July.”

Further, Vijayakumar added, “The steady decline in the dollar index from over 109 to around 106.20 has now slowed capital outflows from other markets to the United States. Q1 financials led to increased demand for these stocks. Change in REIT strategy led to short hedges in financials and information technology in recent days.”

From July 22, Sensex was up at least 1,498 points in the week ending July 25-29, while Nifty 50 was up nearly 440 points. Sensex and Nifty 50 both jumped nearly 3% each in the last week of July.

Sentiment in this week’s trading session will revolve around RBI’s monetary policy results and June 2022 quarterly results.

In their research note, analysts Indranil Pan, Deepthi Mathew and Radhika Piplani of Yes Bank said: “As expected, the FOMC raised the policy rate by 75 basis points for the second consecutive time to 2.25- 2.50%. Fed Chairman Powell did not provide any significant future guidance, but signaled a data-dependent Fed going forward. He said the current dot chart projections of an FFR of 3.25-3.50% by December 2022 remain appropriate, indicating a 100 basis point increase from current levels. This likely signals a slowing pace of rate hikes.”

“While the Fed is aware of the slowing effect on the economy, recession is not something on their minds now as labor markets continue to remain strong. dovish rate hike The dovish hike also led to a relief rally for risky assets, although the likelihood of a recession will soon have to be priced in. Even if the RBI does not strictly follow the Fed, we continue to see the RBI increase by 50 basis points in August,” the analysts added.

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