Indian equity markets have shown signs of recovery after a period of weakness as foreign institutional investors (FIIs) have started buying, offering some support to investor sentiment. According to the latest data, FIIs were net buyers of Rs 6,688.37 crore in the cash segment on Sept. 2, while domestic institutional investors (DIIs) also remained buyers, with net purchases of Rs 2,812.98 crore.
At first glance, the FII buying appears encouraging for investors waiting for the market to recover. However, a closer look suggests that the number needs to be interpreted with caution. The Rs 6,688.37 crore figure included a large Rs 12,061 crore block transaction involving Altius Telecom Infrastructure Trust.
Excluding this transaction, the underlying FII cash flow would work out to roughly Rs 5,373 crore of net selling, according to an analysis of the exchange data.
The market's price action also indicates that volatility has not disappeared. The Nifty 50 closed at 23,914.45 on Sept. 2, down 0.6%, marking its third consecutive losing session and taking the index below the 24,000 level. The Sensex also declined 0.5% to 76,570.35.
So, the main question remains: Should investors deploy a large lumpsum now, or should they wait for greater clarity?
ALSO READ: Rs 10,000 SIP With A 10% Annual Step-Up: How Much Could You Have After 20 Years?
Is Lumpsum Investment A Good Idea Now?
The recent turnaround in FII flows may appear encouraging for investors who have been waiting for a market recovery. For investors with a long-term horizon, waiting indefinitely for the “perfect” entry point may not be practical. At the same time, deploying the entire amount immediately after a market rebound can expose investors to timing risk if markets correct again.
One approach is to invest the lumpsum in tranches over several weeks or months. Investors can also consider a Systematic Transfer Plan (STP), where money is gradually moved from a relatively lower-risk fund into equity funds according to a predetermined schedule.
Another strategy could be to invest a portion of the lumpsum available money now while keeping the remaining amount aside. This allows investors to participate if the recovery continues while retaining funds to invest at lower levels if markets fall again.
A short-term rebound does not necessarily mean that volatility has ended. Investors should also remember that daily FII flows alone do not determine the market's direction. Global interest rates, crude oil prices, corporate earnings, geopolitical developments, valuations and subsequent foreign fund flows can all influence equities.
Ultimately, the decision should depend on the investor's time horizon, risk appetite and financial goals.
ALSO READ: Want Rs 1 Crore By 45? Here's How Much You Need To Invest If You Start At 25, 30 And 35
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
