Market participants attribute largecaps outperformance over midcaps and smallcaps to signs of foreign institutional investors (FIIs) turning buyers in the secondary market after months of sustained selling.
The rebound in Sensex and Nifty was largely driven by strong buying in heavyweight stocks across sectors, with IT majors leading the charge. Easing selling pressure from FIIs helped.
First fortnight data of June month shows FIIs bought stocks from real estate, telecom and financial services sectors but sold IT, metals and oil and gas.
FIIs improved their long-short ratio for index futures from 14 percent to 28.26 percent by buying over 1.2 lakh index futures contracts. This shift came amid robust short covering on June 3.
According to Pranav Haldea, Managing Director, PRIME Database Group, Indian markets are moving towards self reliance with the share of DIIs set to overtake that of FIIs in the next few quarters.
Escalating Israel-Iran tensions, the rise in bond yields due to hotter-than-expected US inflation and amendment in the India-Mauritius tax treaty is likely to impact FII flow and dampen the sentiments.
Stock exchange data showed net foreign portfolio inflows into India hit a 15-month high of $2.42 billion in February, a big swing from 2018's net outflows of $4.4 billion, the largest since the 2008 global financial crisis.
The inflows can be attributed to the improvement in some of the underlying factors such as weakness in crude oil prices, improvement in rupee against the dollar and better earnings from Indian Inc, said Himanshu Srivastava, Senior Research Analyst at Morningstar.
Nomura Group and Parvest Equity India have exit the Vadodara-based fruit juice maker company.
In addition, such investors put in Rs 530 crore in the debt markets during the period under review.
Overseas investors have pumped in nearly Rs 5,000 crore into the country's debt markets in the last four trading sessions, primarily due to increase in the limit on foreign ownership of bonds.
A look at the investment data of foreign institutional investors and mutual funds for the last 10 years, reveals that mutual funds have turned net buyers in the last 3 years.
With funds outflow of USD 744 million, listed foreign funds investing in India continued to be sellers in December last year, says a report.
There is no major economic event in global as well as domestic sphere and this in turn, would keep the overall market range-bound. Moreover, the holiday spirit is expected to keep the market muted on account of less volume on the FII counter.
Citi says in the week of 11/23/2016, bond funds continued to see a large outflow of USD 8.6 billion while equity funds had an inflow of USD 5.2 million. India continued to see USD 837 million of FII outflow.
The report by ICICI Securities noted that volatility in foreign portfolio investor (FPI) flows has returned after seven months and could continue in the third quarter.
Since 10 October, FIIs have sold $1 billion in equity and have been sellers on all but two trading sessions over this period. So far this year, FIIs have remained net buyers of Indian equity and have bought $6.76 billion in domestic equity, Mint reported on Wednesday.
It looks like foreign institutional investors (FIIs) are extremely bullish on Indian equities. In the last 10 trading days to July 21 FIIs have been net buyers.
Foreign investors dumped shares worth Rs 178 crore in the first two weeks of May as worries over global economy and amended Indo-Mauritius tax treaty hurt the sentiment, reversing the last two months' bullish trend.
Foreign investors have pumped in a staggering over Rs 19,000 crore in the Indian capital markets in October so far -- the highest level in six months -- buoyed by RBI's rate cut and positive macro numbers.
Foreign investors poured a mere Rs 547 crore in Indian capital markets during April-June quarter, after pumping in a whooping Rs 79,000 crore in the preceding three months.
Foreign investors have pulled out more than Rs 3,300 crore from Indian stock markets so far this month, mainly on account of better returns from Asian peers, concerns over a slow revival in corporate earnings and continued worries over taxation issues.
The cumulative net investments by foreign investors have now gone past Rs 11 lakh-crore mark, with about Rs 2.74 lakh crore being infused into Indian capital markets by such investors during 2014-15 alone.
The combination of a pick-up in economic and earnings growth as well as a fall in interest rate would help markets to stay strong going forward, believes Adrian Mowat of JPMorgan.
With overseas investors pumping in over USD 3 billion in the Indian capital markets this month, total foreign inflows have touched USD 13 billion since the beginning of the year.