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Last Updated : Sep 16, 2020 03:36 PM IST | Source: Moneycontrol.com

Institutional flows to slow down, markets to consolidate in near-term: BofA Securities

The recent large fundraises and resulting highest ever capital ratios provide downward support to valuations of financial stocks meantime, BofA Securities said.

With MSCI India's valuation premium to EM currently well above the historical average, we expect institutional flows to slow down and markets to consolidate near-term, said BofA Securities.

Any rally thereafter, the brokerage said, could be led by select private sector financials once clarity on NPAs emerges.

The recent large fundraises and resulting highest ever capital ratios provide downward support to valuations of financial stocks meantime, BofA Securities said.

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In continuation of the trend seen in July, FII and DII flow into Indian equities had contrasting trails in August: $6.3 billion inflows by FIIs versus $0.6 billion DII redemptions.

BofA Sec also continues its overweight on industrials and materials and see scope for FII repositioning in these sectors on improving traction for Make in India and the government's CAPEX push.

FIIs inflows into Indian equities continued to be robust in August at nearly $6.3 billion, highest in five years.

Even adjusted for primary market flows on $3.9 billion led by the banking sector fundraises, FII inflows were still robust at $2.4 billion.

This despite $78 million outflows by passive funds, the continuation of a trend seen over the last eight months.

While India saw strong FII inflows, most EMs, as per BofA Securities, witnessed FII outflows in August: South Korea (-$2.3 billion), Taiwan (-$2.2 billion), South Africa (-$1.3 billion) and Thailand (-$0.9 billion).

With MSCI India's valuation premium to EM currently more than 25 percent above the historical average, BofA Securities thinks Indian markets could now consolidate near-term and incremental FII flows could slow down; flows in September so far have already been nearly flat (-$153 million).

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Sep 16, 2020 03:36 pm
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