The Indian market witnessed smart recovery in the second half of May as the market benchmark Nifty50 hit a new closing peak of 15,583, gaining 6.5 percent for the month.
A sustained drop in daily COVID-19 cases, improvement in recovery rates and a pick up in vaccination pace booosted market sentiment as investors anticipated a faster-than-expected economic recovery.
As investors hoped for government-enforced restrictions to ease quickly, reopening/unlock theme and economy-centric stocks came into focus.
As per a report by Edelweiss Securities, foreign portfolio investors (FPIs) cut defensive bets and added high beta and reopening themes.
"The sectors which attracted FPI flows were banks and finance ($666 million), metals & mining ($160 million), power ($124 million), auto ($99 million) and logistics ($64 million). The top four sectors which saw maximum outflow were IT ($415 million), insurance ($372 million), telecom ($237 million) and oil & gas ($230 million)," Edelweiss said.
In May, FPIs were net sellers to the tune of $397 million in May versus an outflow of $1,297 million seen in April.
"FPIs sold equities worth $876 million in the first half of May while with the improving prospects in the second half they quickly switched the stance as they bought equities to the tune of $479 million. In the second half, FPIs mainly added banks & financial to the tune of $924 million versus net sell of $260 million in the first half of the month," said Edelweiss.
The brokerage firm pointed out that along with improving economic prospects, the second half was also supported by MSCI rejig-led inflows to the tune of approximately $250mn.
The Nifty has been hitting a fresh record high for the last couple of days and FPIs seem to have turned strongly bullish on the Indian market.
As per NSDL data, in June so far FPIs have pumped in Rs 9,058 crore into the Indian financial market on a net basis.
"Globally, stock markets are unusually stable and resilient. This trend is likely to change when there are indications of change in the ultra-loose monetary policy of the Fed," said VK Vijayakumar, Chief Investment Strategist at Geojit financial services.
"When the GDP growth and job generation in the US become strong or inflation rises more than expected, the Fed will start talking of tapering their bond-buying program. This is likely to trigger selling in stock markets globally. This will trigger capital outflows from emerging markets too," he said.
Most analysts and brokerage firms are positive on the Indian market from the medium to long-term perspective.
Vinod Nair, Head of Research at Geojit Financial Services, expects Nifty to rise up to 16,000 by December 2021 based on improved economic growth from Q2 FY21 onwards.
He believes mid and small-caps can continue their buoyancy at least in the short to medium-term because they are disconnected compared to the performance of large-caps.
Shankar Sharma, co-founder and vice-chairman, First Global, is extremely bullish on domestic as well as global equities.
"I think the next year, two years, three years for Indian equities, global equity, emerging market equities, everything appears extremely optimistic," Sharma said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.