In the midst of the pandemic and global slump, Indian equities have turned out to be a favoured investment destination for foreign institutional investors (FII), courtesy low valuations and recent stimulus measures along with steps to ease liquidity by the RBI and the Centre.
Experts opined that the stimulus measures have aided in the uplifting of sentiments. They also said that healthy global liquidity levels have allowed for increased inflows into the domestic markets.
The sequential foreign investment inflow data points at increased interest in Indian equities. The Net FII inflow data showed that from June 1st till the June 8th some Rs 14,740 crore had flown into the country.
In May, the net inflow stood at Rs 13,914.40 crore. The gross FII inflow so far in June stands at Rs 48,325.68 crore and that in May was Rs 1.56 lakh crore. This rise in net inflows comes after net outflow for four consecutive months.
With the recent cuts in the cash reserve ratio (CRR), banks too are flush with money according to the sector experts which has also boosted the sentiments regarding liquidity in the system, giving a push for the rise in FPIs.
In a recent television interview ace investor Rakesh Jhunjhunwala said that India will soon enter a bull run and the government is likely to increase expenditure post the lifting of the lockdown.
Several experts have, however, also cautioned that this may be a temporary phenomenon for making 'quick' returns.
Notwithstanding, the attractiveness quotient also gets increased by the fact that many economists have predicted a sharp rebound in India's growth post the pandemic.
Even, the current low valuation of premium stocks due to the recent oversold position of the domestic market is another factor for increased inflows.
"Global easy money policy has led to healthy investment in emerging markets like India. These are done to get quick returns," Deepak Jasani, Head of Research of HDFC Securities told IANS.
"Our markets were oversold and select stocks were attractively valued," Jasani said.
According to Siddharth Khemka, Head, Retail Research at Motilal Oswal Securities: "Indian equities followed positive global cues, which was driven by ECB's additional stimulus boost. Investors are pricing in a global economic recovery, supported by Central Banks' policy measures across economies. Positive FII inflows over past few sessions also provided support to the market."
"Given the sharp rally witnessed over last few days, we may see the Indian markets consolidating or taking a breather, before starting the next leg of rally. Even valuations have turned expensive at 21xFY21E earnings and any negative development on the global front might derail the momentum."
On his part, Aamar Deo Singh, Head Advisory, Angel Broking said: "Going forward, investors are advised to be cautious, given the risk-reward scenario at current levels. And FIIs will also be no exception."
"So, it's going to be very selective approach towards investment. The best shall gain while the rest shall flounder."
Additionally, Rahul Sharma, Head of Research at Equity99 Advisors, was of the view that although several investors expect another correction, FIIs feel that the buy prices are available at a discount.
( 536 Words)