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.