BJP win may attract FPI inflows but it is not the only thing that matters: BT Markets survey

Foreign Portfolio Investors (FPIs) have remained net sellers in the Indian equity markets amid the volatility led by the general elections in the country. However, the Indian is heading towards the election outcome due next week, overseas investors have turned buoyant of the Indian stocks.
 

According to the data from NSDL, FPIs have offloaded Indian stocks more than Rs 20,153 crore in the month of May 2024 (May 1 to May 29) so far, while their selling for the entire calendar on a year-to-date bases stands close to Rs 17,931 crore.
 

Analysts participating in the BT Markets election survey believe that FPIs will return to Indian Equities if BJP is re-elected and Prime Minister Narendra Modi comes to power for the third with a clear and complete majority. They see Modi's victory as a clear sign of policy continuation.
 

Narendra Solanki, Head Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers said that India is currently the fastest growing large economy with much better scope in terms of growth and scale. "It's very difficult to give a number or a range but I think the current government is coming back with a comfortable majority," he said.
 

FPIs are likely to return if the BJP is re-elected, said Arpit Jain, Joint MD at Arihant Capital Markets. "We may see some corrections initially, but overall, re-election of BJP is seen as a long-term opportunity rather than a short-term event," he said.
 

"We anticipate that large amounts of capital currently lie on the sidelines, waiting to be deployed," Amnish Aggarwal, Head - Institutional Research at Prabhudas Lilladher, who sees a strong return of overseas investors in the Indian market.
 

On the other hand, India’s weightage in MSCI index is inching up which means passive money will flow in. Private banks can be a big beneficiary of FII inflows as they are already trading at a significant discount to their last 10 year P/ABV. Key stocks include HDFC Bank, Kotak Mahindra Bank, Axis Bank, ICICI Bank, Aggarwal added.
 

The possible re-election of the BJP government could potentially lead to increased Foreign Portfolio Investor (FPI) inflows into India, said Ravi Singh, Senior Vice-President (Retail Research) at Religare Broking "The perception of business-friendly policies and the stability of the current government may boost investor confidence and attract more capital into the Indian market," he said.
 

On the other hand, some analysts believe that FPI investment is not only based on BJP's win in elections. They, however, see factors like global interest rate cuts and geopolitical tensions across the globe as major triggers for the FPI rebound in the Indian markets.
 

Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities has a different view on FIIs outflow. He said The FII outflows is driven more by the rising interest rates and yields in the US rather than a particular party’s government at the centre. "If the US yields fall then FII’s may return," Sheth said.
 

There is a possibility of FPI inflows coming back to India if the BJP is re-elected. The outcome of the general elections and the subsequent political stability are crucial factors that can attract significant inflows from foreign investors into the Indian market, said Nikunj Saraf, Vice President, Choice Wealth.
 

Political stability is seen as a key driver for attracting huge inflows, and the election results are expected to bring about a dramatic change in FPI equity flows, he said. Saraf, partially seconds Sheth's view and said that potential easing of interest rates by the US Fed and resolutions in geopolitical tensions will also strengthen FPI inflows into India post the Lok Sabha elections.
 

 

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