US Fed commentary, expectations of a recovery in earnings, as well as expectation of a stable government at the center are some factors which might be triggering a rally in Indian markets, suggest experts.
Foreign Institutional Investors (FIIs) poured in over Rs 3,800 crore on March 11 taking total inflows to a little over Rs 8,000 crore so far in March. This pushed the S&P BSE Sensex to a 6-month high.
Meanwhile, the rupee touched 2-month high. The Indian rupee advanced by 25 paise to close at 69.89 against the US dollar in line with a strong rally in domestic equities, reflecting positive investor sentiments amid hopes that the incumbent NDA government will get the second term.
String flows from foreign investors pushed benchmark indices to break above their crucial resistance levels. The S&P BSE Sensex closed above 37,000 on March 11 for the first time since September 19, 2018, while Nifty50 reclaimed 11,100 for the first time since September 21.
FPIs were net buyers (equity and debt) in February as well as January 2019 for Rs 13,564 crore and Rs 127 crore, respectively. The positive change in sentiment is triggered by domestic as well as global factors and the trend is likely to continue for some more time.
US Fed commentary, expectations of a recovery in earnings, as well as expectation of a stable government at the Centre are some factors that might be triggering a rally in Indian markets, suggest experts.
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 January 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 ‘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.
He further added that corporate earning in India is likely to grow around 25 percent in FY 2020. Therefore, India is likely to attract continuing capital flows for the rest of the year.
The positive sentiment in small and midcaps helped these indices outperform the benchmark by a wide margin in March.
The S&P BSE Midcap index has risen 5.4 percent in March so far, while the S&P BSE Smallcap index gained 7.8 percent. In comparison, S&P BSE Sensex has moved up 3.3 percent this month.
The banking sector has also seen a lot of momentum with the Bank Nifty rising 4.3 percent in March so far.
“The sentiment on Indian market has made a dramatic comeback as mid and smallcaps have seen stellar run for the past two weeks. The market has seen broad-based robustness with buying interest visible across the sectors,” Jagannadham Thunuguntla, Sr VP and Head of Research (Wealth), Centrum Broking Limited told Moneycontrol.“FIIs have continued their aggressive buying triggering a pre-election rally. The months of February and March 2019 have seen FII inflows to the tune of Rs 20,000 crore. As border tensions appearing to have cooled-off, and global central bankers turned pro-liquidity, Indian markets are in the risk-on mood,” he said.