Mumbai: In just two weeks of July, foreign institutional investors (FIIs) made a net investment of at least $3.5 billion (Rs14,175 crore) into the Indian stock markets, almost 80% of the amount they have invested in the entire first six months of the year.
Between January and June, FIIs had made a net investment of $4.37 billon.
This data from India’s market regulator, the Securities and Exchange Board of India (Sebi) explains one key reason why the benchmark Sensex has continued to rise and reach record highs even as there has been a sluggish start to first quarter earnings season, with a clear slowdown in corporate earnings growth momentum among some large companies that have reported results so far, such as Infosys Technologies Ltd and Bajaj Auto Ltd.
The Sensex, which is an index of 30 stocks on the Bombay Stock Exchange, has gained about 1.5% in just the last five trading sessions to close at 15,272.72 on Friday. The broader Nifty index, which represents 50 stocks on the National Stock Exchange, has meanwhile added 1.93% to reach 4,504.55 during the same period.
It also helps that the Indian market had relatively under performed other emerging markets in past six months. And, of course, fuelling the Indian markets are also most key global indices as well as emerging market indices, which have generally risen significantly this week. The Dow Jones Industrial Average closed at 13,861.73 on Thursday, adding 1.55% in four trading sessions, and posting 28 all-time highs this year. In the early US trading on Friday, it was up 0.3% at 13,902, while the broader S&P index was up 4.29% to 1,551.99, with five record closes so far this year.
Among the emerging market indices, South Korea’s Kospi appreciated 4.21% to 1,962.93 on Friday and the Brazilian benchmark index, Bovespa, added more than 3% to close at 57,565.60. Key indices in China and Hong Kong also made significant gains since Monday.
“Earlier, cues from large scrips such as Infosys could drive the market for many days. Today, the market moves with a broader perspective,” says Sudip Bandyopadhyay, CEO of Reliance Money Ltd, a domestic brokerage. “Institutional money is pouring into blue-chips and mid-caps. This is pulling the Sensex and Nifty to new highs...The forward price earning multiples shows that the market at current levels is not that expensive.”
“The spurt on Sensex and Nifty is a follow-up to the global market trends (and the) market is moved by the FIIs,” says Jignesh Shah, vice-president in charge of investment advisory services at ABN Amro Bank NV.
Predicts Nalin Shah, a director with a domestic brokerage that advises institutional investors: “We expect the Sensex to rally to 16,000 levels within a month.”
WORLD MARKETS ON UPSWING (Graphic)