In February, foreign portfolio investors (FPIs) had invested a net amount of Rs 11,182 crore in the capital markets (both equity and debt)
The S&P BSE Sensex has rallied by over 1,000 points so far in March, excluding Tuesday’s smart rally of nearly 500 points, while Nifty50 has risen nearly 400 points in the same period.
Positive global, as well as domestic cues boosted risk-on rally on D-Street. Supported by a sharp rally, the market capitalisation (m-cap) of BSE-listed companies rose by Rs 6.52 lakh crore as of March 11 to Rs 146.93 lakh crore on Monday compared to Rs 140.41 lakh crore recorded on February 28.
Here is a list of top 5 factors which could be fuelling the rally in Indian markets:
Strong buying from foreign investors:
Foreign Institutional Investors (FIIs) poured in over Rs 3800 crore in Monday’s session taking total inflows to a little over Rs 8,000 crore so far in March which pushed the S&P BSE Sensex to a 6-month higher while the currency touched a fresh 2-month high.
FIIs were net buyers (equity & debt) in February as well as January 2019 for Rs 13,564 crore, and Rs 127 crore respectively, Moneycontrol.com data showed.
In February, foreign portfolio investors (FPIs) had invested a net amount of Rs 11,182 crore in the capital markets (both equity and debt).
“FPI inflows into India has clearly turned positive since the end of Jan this year. The flows in February were the highest since November 2017. The trigger for this inflows is the dovish statement that came from the Fed at the end of January,” VK Vijayakumar Chief Investment Strategist at Geojit Financial Services told Moneycontrol.
“The Fed had categorically stated that ‘the rate hikes are on hold’ in the context of the global slowdown. India, like other emerging markets, is receiving capital flows due to this trigger,” he said.
Opinion Polls say Modi may come back to power:
Indian markets rallied a day after Election Commission announced the final dates for Lok Sabha elections. The elections will begin on April 11 and polling will be held over seven phases till May 19, followed by counting of all votes on May 23.
The ruling Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) will sweep a majority of parliamentary seats up for grabs in the election starting April 11, Reuters quoted CVoter opinion poll which was televised on a local channel over the weekend.
The coalition led by Prime Minister Narendra Modi could win 264 seats in the election compared to 141 for the Congress Party-led opposition alliance. A total of 543 seats are up for grabs in the election.
More opinion polls in the run-up to the final event are likely to ease concerns around a weak coalition and fuel rally in Indian markets, suggest experts.
“Markets have rallied post events in the border state which has certainly improved prospects of the ruling party in the upcoming general elections,” Dipan Mehta, Director, Elixir Equities told Moneycontrol.
“The trend may continue for a few more weeks, but large scale follow up buying is likely to emerge only if there is a favourable outcome in the Lok Sabha elections. Opinion polls leading up to the results will also impact the sentiment be it positive or negative,” he said.
On Monday, US markets snapped 5-day losing streak. The gains were largely led by technology stocks. Asian shares rose after the European Commission agreed to changes in a Brexit deal ahead of a vote in the British parliament on a divorce agreement.
European Commission head Jean-Claude Juncker agreed to additional assurances in an updated Brexit deal with British Prime Minister Theresa May on Monday, but warned UK lawmakers would not get a third chance to endorse it, said a Reuters report.
Rally in small & midcaps:
The broader market is one space which is attracting maximum attention. The S&P BSE Mid-cap index rose 5.4 percent while the S&P BSE Small-cap index gained 7.8 percent compared to 3.3 percent up move seen in the S&P BSE Sensex so far in March.
The value is emerging in select bottom-up opportunities in the mid-caps space, CLSA suggests in a note because, despite the recent recovery, the Mid-cap Index has still underperformed the Nifty on a year-to-date (YTD) basis.
The valuation discount to the Nifty now stands at 8.5 percent. The earnings downgrades for FY19 on Mid-caps have been significantly lower than Nifty which is positive.
“A sectoral analysis highlights that recent stock performance is led by sectors where investors perceive ‘value’. We highlight that 40 percent of Nifty Midcap universe is trading below its 5-year average valuation, particularly in the Industrial & EPC space,” said the CLSA note.
The S&P BSE Sensex closed above 37000 on Monday for the first time since September 19, 2018, while Nifty50 reclaimed 11,100 levels for the first time since September 21.
Continuing the momentum, the index reclaimed 11,200 levels for the first time since September 19, 2018. Investors should remain long on the index with a stop loss below 11000 levels, suggest experts.
The index is currently trading above its 20, 50, 100 and 200-Day SMA. Oscillators and Indicators like DMI and MACD have turned bullish on the daily as well as weekly charts.
“The immediate resistance for the Nifty is seen at 11345, which happens to be 76.4 percent Fibonacci retracement of the fall seen from the all-time high 11,760 (Aug 2018 High) to 10,004 (Oct 2018 bottom),” Nandish Shah, Senior Technical & Derivatives Analyst, HDFC Securities told Moneycontrol.
“Support is now shifted upward to 11,000 for Nifty which was acting as resistance earlier. The Bank Nifty gained 0.74 percent to close at 27966 levels. Bank Nifty is only 1.5 percent away from its all-time high of 28388, registered in Aug 2018,” he said.Shah further added that considering the technical and derivative evidence discussed above, we believe that one should remain optimistic in the Nifty with the stop loss of 11,000 levels.