According to Citi, participation by domestic investors holds the key to a sustained uptrend. This is borne out by the fact that equity benchmarks declined 3 percent in the January-March quarter even as FIIs were buying heavily.
Brokerage house Citi has said that participation from domestic investors was important if the market had to sustain the uptrend. Local insurance companies and mutual funds have net sold close to Rs 39,000 crore so far (according to stock exchange data) this calendar, compared to around Rs 47,000 crore of net purchases by foreign institutional investors.
Citi has retained its year-end (December 2013) target of 20,800 for the Sensex and but cautioned that it is not a bull market yet despite heavy purchases by foreign institutional investors.
The BSE Sensex briefly hit psychological 20,000-mark Wednesday, and the Nifty has managed to hold above 6000.
FII ownership of the Indian stock market hit an all-time high of 21.2 percent during the March quarter, up 1.28 percentage points over the previous quarter.
According to Citi, FII buying alone will not be able to take the market higher beyond a point. This is borne out by the fact that equity benchmarks declined 3 percent in the January-March quarter even as FIIs were buying heavily.
"While foreign flows have been very strong, FII portfolio stance seems to have turned more conservative, with higher allocations to energy, telecom and health care, and lower allocations to the stronger performing/larger financials and IT," the Citi note to clients Wednesday said.
"The strong JanMar (FII purchases) helps, but more is needed to get to those market levels, and a slowing of domestic outflows -which we expect to some extent could make a material difference. India’s big 12-month bull market of 2007 (+47 percent), saw domestic ownership rise faster than that of foreigners," the Citi note said.
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