Benchmark indices are seen hitting new peaks in the days ahead with foreign portfolio investors (FPIs) powering the rally.
Portfolio inflows turned positive in March with net investments of Rs 7,936 crore and it rose to Rs 11,631 crore in the following month. In May their buying has only intensified and stands at over Rs 37,300 crore which is a nine-month high. So far in the calendar year, they have invested over Rs 22,700 crore according to NSDL data.
On Friday, the Sensex had closed with gains of over 629 points even as the Nifty was up 178.20 points as the overseas investors made net purchases of over $300 million or Rs 2,400 crore.
While the week saw the 30-share index rising over 772 points or 1.25 per cent, the Sensex is only 1081 points away from its record high of 63583.07 hit in early December 2022 while the Nifty is short of 388 points from its all-time peak.
Amid favourable conditions, analysts feel the indices could touch fresh peaks, though they are cautious of a breakneck rally as valuations are expensive.
They add that factors such as a resilient Indian economy, moderation in inflation and a likely pause in Reserve Bank of India rate hikes could propel stocks to new highs.
Moreover, the IMD’s forecast of a normal monsoon during the year despite concerns about El Nino is also positive as it could lower inflation and boost domestic consumption which could be beneficial for sectors such as FMCG.
It's among these conditions that foreign investors have turned bullish on India.
"The sustained buying by FPIs has lifted the Nifty by 2.4 per cent in May. India is among the best-performing markets such as Japan, Taiwan, South Korea, and Brazil while other markets, both developed and emerging, are struggling. FPIs have been buyers across sectors.
They invested in sectors such as automobiles, capital goods, healthcare, oil & gas, and telecom. Massive buying was witnessed in financial services, particularly banking,’’ V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, said.
He added that leading macro indicators in India such as GST collections, PMI data, and credit growth suggest a resilient economy that can deliver 6 per cent GDP growth and mid-teen earnings growth in 2023-24.
Further, the latest CPI inflation print of 4.7 per cent in April has also come as a positive for the markets, thereby indicating that interest rates have peaked in India.
