Earnings, FIIs to be key stock market drivers

Politics and markets are closely aligned and related. Seven out of nine rounds of polling are over and the last two would be held on the May 8 and 12.

Markets are hoping for a stable one. This hope is keeping markets buoyant. Investment by foreign institutional investors (FIIs) has been quite robust and the rally, which began in December 2013, when results for the Assembly elections were declared, is still on.

A lot of water has flown since then and markets have been gaining. While the benchmark indices, the Sensex and Nifty, have gained about 10 per cent, the midcap and smallcap have gained between 16 per cent and 20 per cent. This rally is based on FII inflow and the market's optimism about a stable government that would push reforms stalled for want of direction and decisions stuck in corruption and policy paralysis.

Foreign investors pumped Rs9,600 crore into stocks in April, the eighth consecutive month of inflow.

FIIs bought shares worth Rs74,985 crore and sold stocks to the tune of Rs65,383 crore resulting in a net inflow of Rs9,602 crore ($ 1.6 billion), according to data from the Securities and Exchange Board of India.

This was the eighth consecutive month of net inflow by foreign investors after they pulled out Rs5,923 crore from the stock market in August. FIIs withdrew Rs9,185 crore ($ 1.51 billion) from the debt market last month. According to market analysts, FIIs are bullish on India and expect a stable government to be formed after the Lok Sabha elections.

The strong inflow in recent months has taken the net investment by FIIs to Rs32,377 crore ($ 5.3 billion) in Indian equities so far this year. They invested Rs20,077 crore in stocks in March compared with Rs1,404 crore in February and Rs714 crore in January. There are currently over 1,700 registered FIIs in the country along with about 6,400 sub- accounts.

With no major data due this week, investors are expected to focus on the ongoing quarterly earnings and foreign fund inflow for further cues. HDFC, Lupin, Glenmark Pharmaceuticals, Union Bank of India, Glaxo- Smithkline Consumer Healthcare and Ranbaxy Laboratories are some of the majors that will declare their earning this week.

Markets stabilised and consolidated over the last four weeks at higher levels. While new highs have been made at 22,900 and 6,900 on the Sensex and Nifty respectively, they have been quiet in the last three weeks or so. The open interest has also corrected itself and so has volatility. With exit polls due on May 12, post the last round of voting and results on May 16, markets are waiting for the change. It's just the actual numbers which may differ, but the change has already taken place.

(The writer is an investment analyst)

Courtesy: Mail Today