Will Modi 3.0 continue to drive FII confidence ahead of Union Budget 2024?

Union Budget 2024 is just a week away and foreign institutional investors (FIIs) have remained buoyant at Dalal Street since the formation of Modi 3.0. The buying interest of the overseas investors after the election outcome has lifted the headline indices to new highs ahead of the upcoming union budget on July 23.
 

FIIs, which sold domestic equity shares worth more than Rs 34,250 crore in the first two months of the current financial year,  have pumped nearly 47,300 crore in the Indian equity markets since June till July so far. Institutional investors are in no hurry to buy shares at lofty valuations after the recent run-up.
 

Market participants in the Business Today Budget Survey believe that Indian stocks, despite being expensive, will attract overseas inflows on the back of growth outlook and every major or minor dip in the equity markets will be bought. However, others believe that overseas companies will also look at cheaper and attractive markets like China.
 

The Indian economy is the best placed large economy in the world if one considers growth estimates, said Shrey Jain Founder and CEO, SAS Online, a deep discount broker, who also believes that the local equity valuations are not particularly cheap.
 

"Other emerging markets including China are appealing for many FPI given cheaper valuations. The Union Budget should reaffirm the Indian government’s commitment to the mandate of economic growth and fiscal prudence. This should make FPIs commit incremental money to Indian stocks," he added.
 

On the other hand, DII’s  2023. They have purchased equities worth Rs 1 lakh crore in April and May and followed up with another investment of Rs , said Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities
 

"We do not see any slowdown in domestic investments.  SIP inflow and may have to forcibly deploy that capital even when there aren’t many lucrative opportunities," he said.
 

FPIs may be waiting for the budget to assess the priorities of the current coalition government before making significant fresh investments in the Indian equity markets, said Nishit Master, Portfolio Manager at Axis Securities PMS.
 

"One reason for the recent lack of significant FPI inflows could be the high premium valuations at which Indian markets are currently trading. This means that even a minor correction could lead to significant inflows by FPIs into the Indian equity markets," he said.
 

"Valuations have been a concern when viewed in comparison to historical levels, however we remain positive in the long term specially as the growth outlook improves," said Nitasha Shankar, Head Equity Strategy at YES Securities.
 

Other market participants believe that the Indian markets may consolidate in the near-term amid cues like direction of monsoon, union budget and India Inc's performance in the June 2024 quarter. Domestic benchmark indices may remain range bound after a strong 11 per cent rally post-election outcome.
 

Narendra Solanki, Head Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers think that markets have stabilised post-election shock and, in some sectors, have reached new highs. "We are seeing some sector rotation happening and markets consolidating before the budget," he said.
 

Echoing the similar tone, Trivesh D, COO at Tradejini said that the market at record highs may turn volatile and may remain sideways amid the absence of direction. In such situations, institutional players adopt a ‘wait and watch’ strategy.
 

Before the election, FPIs sold shares due to uncertainty surrounding the event-risk of general elections. With the coalition government running at the centre led by the BJP, markets have recouped all its losses and is trading close to all-time highs, said Manish Chowdhury, Head of Research at StoxBox.
 

"Currently, we believe that institutional investors are awaiting more clarity from the budget in terms of capital expenditure in key sectors for deploying meaningful capital in markets," he said.

 

 

 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.