Foreign institutional investors' flows into the domestic equity market reached a nine-month high of Rs 37,316 crore on a month-to-date basis till May 26, indicating an inflow of Rs 2,073.15 crore per day in 18 trading sessions so far. As a result, the sustained buying by global investors lifted the benchmark equity indices BSE Sensex and NSE Nifty by 2.27 per cent and 2.40 per cent, respectively in May.
The 30-share index Sensex advanced to 62,501.69 on May 26 from 61,112.44 on April 28, 2023. Likewise, the 50-share Nifty gained to 18,499.35 from 18,065 during the same period.
Market watchers believe that favourable macroeconomic data managed to attract foreign investors. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “FPIs have been buyers across sectors. They invested in sectors like automobiles, capital goods, health care, oil & gas and telecom. Massive buying was witnessed in financial services, particularly banking.”
Data from NSDL showed that FII’s assets under custody (AUC) in the financial services sector increased to Rs 16.40 lakh crore (in equities) as of May 15, 2023 from Rs 15.96 lakh crore on April 30. Likewise, their AUC in automobiles, FMCG and oil & gas sectors witnessed a rise of Rs 22,300 crore, Rs 15,856 crore and Rs 10,668 crore, respectively. Their AUC in consumer durables, capital goods, information technology and healthcare sector also increased by over Rs 5,000 crore during the same period.
Vijayakumar further added that leading macro indicators in India like GST collections, PMI data and credit growth suggest a resilient economy which can deliver 6 per cent GDP growth and mid-teen earnings growth in FY 24. The GST collections stood record Rs 1.87 lakh crore in April 2023.
“In this favourable macro setting, FPI flows are likely to continue supporting the market,” he said.
The latest CPI inflation (4.7 per cent in April against 6.52 in January) has come as a shot in the arm for markets while the Reserve Bank of India kept its policy repo rate unchanged at 6.5 per cent in its last monetary policy meeting. According to foreign brokerage Jefferies, there are expectations that inflation should run around 5 per cent for the rest of the year which is below the upper band of the RBI’s target, namely 6 per cent. This also indicates that interest rates have peaked in India.
Of late, Jefferies also said that India’s structural story is still intact and that it will only be a matter of time before the BSE benchmark Sensex reaches the 1,00,000 mark. The target, Jefferies said assumes 15 per cent EPS growth on a five-year view and that a five-year average one-year forward PE multiple of 19.8 times is maintained.
“Foreigners have also returned of late as net buyers of Indian equities. Dedicated emerging market investors now appear only to be slightly overweight India, relative to history. One issue here is that India’s neutral weighting in the MSCI benchmarks has always been inappropriately low given the size of the economy. India still accounts for only 13.2 per cent of the MSCI AC Asia Pacific ex-Japan Index,” Jefferies said.
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