Catapulting Sensex beyond the 71,000 mark and making 21,000 the new pincode for Nifty, FIIs (foreign institutional investors) have been pouring in over Rs 3,900 crore daily on an average in December, making the 30-pack index stronger by 4,000 points so far in the month.
NSDL data shows that in the first 10 days of the month, FIIs invested Rs 39,260 crore on Dalal Street. And now with the US Fed hinting at 3 rate cuts in 2024, the market could once again see a flood of foreign money chasing Indian stocks in the new year.
The sharp uptick in FII flows comes after November’s Rs 9,000 crore inflow and non-stop selling in September and October months.
“This market has made a high despite the fact that we have yet to see significant FII inflows. With the Fed changing its outlook, our sense is that too much money is going to chase a few good stocks, which is why one should stay invested in the market. Probably, better days are going to come even more,” said Pankaj Pandey, Head of Research at ICICIdirect.
Amit Sachdeva of HSBC Securities said FIIs tend to like size and liquidity and as the new year begins there could be a strong rebound in foreign inflows.
“We remain very bullish. India is a key overweight market for HSBC and we continue to like India a lot,” Sachdeva said.
Besides the Fed factor, a sharp dip in the US 10-year bond yield to 3.95% is also a trigger for large capital flows to emerging markets like India. With China turning out to be a disappointment both in terms of returns as well as the unpredictability of policies, there is an inclination towards allocating more towards India than China.
For Jefferies’ Chris Wood, his India portfolio is up 41.2% year-to-date in US dollar terms on a total-return basis while the China portfolio is down 12.1%.
“Normally such contrasting performances would be a signal to go the other way in terms of buying China and selling India. But GREED & fear (his portfolio) has no conviction for such a dramatic move. And nor does anyone else though a surge of China outperformance can happen at any time if there is a positive surprise on the policy front,” Wood said.
Fuelled by strong domestic economic growth, expectations of PM Narendra Modi’s victory in the 2024 Lok Sabha elections, controlled inflation, and increasing corporate earnings, analysts do not see any signs of a bullish reversal in the foreseeable future. However, markets do tend to surprise just when everything looks picture-perfect.
“Mid-teen returns are expected in Indian equity markets, with the Nifty reaching 23500 and the Sensex hitting 78000 by the end of 2024,” said Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy.
Among sectors, analysts have pinned hopes on largecap financials and IT stocks, both of which have a long history of being FII favourites. “Retail exuberance is keeping the broader market buoyant, but valuations here are moving into bubble territory. At high valuations, these segments are vulnerable to sharp correction. Even while remaining invested, investors should exercise caution,” said VK Vijayakumar of Geojit Financial.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
