Mumbai: Domestic institutions, such as mutual funds and other portfolio investors, rushed to buy stocks on Monday, pushing up the Sensex, the benchmark Bombay Stock Exchange index that lost 3.4% on Friday, allowing it to close on the positive side.
India was one of six major Asian markets that made a comeback on Monday despite the US Dow Jones Industrial Average continuing to fall on Friday, though it was up slightly in early trading on Monday.
The Sensex closed at 15,260.91, up 26 points, or 0.17%, while the broader Nifty index of the National Stock Exchange stayed almost flat at 4440.05, losing just 5 points.
Mutual funds and other domestic portfolio investors seem to have again taken Friday’s fall to accumulate stocks even as foreign institutional investors (FIIs) continue to sell some of their Indian equity assets. Domestic institutional investors were net buyers of over Rs854 crore on Monday against Rs727 crore that they bought on Friday.
This buying marks a clear shift in their stance. Until 26 July, a day before the market lost 3.4%, domestic institutional investors were net sellers to the tune of Rs1,595 crore this month, while FIIs were net buyers to the tune of Rs25,245 crore over the same period. But they turned net sellers—of over Rs1,117 crore on Monday, taking FII net sales in the last two trading sessions to Rs2,592 crore.
S.A. Narayan, managing director of Kotak Securities Ltd, however, predicts that even FIIs will not remain sellers for long. “The foreign investors will make a strong come back in the days to come,” he insists. “They cannot remain sellers for long. The general outlook for the market in the short-run is positive. Nevertheless, market could see some amount of bearishness in sync with global markets.”
“All major Asian markets, including India, were highly volatile on Monday. This could continue for some more days,” Narayan says.
Among major Asian indices , the Hang Seng index of Hong Kong was the biggest gainer in absolute terms. It was up 169.49 points to 22,739.90. The Chinese index, which was up by 2.20%, was the largest gainer in percentage terms. The benchmark indices in Japan, South Korea and Singapore also ended up. Representative indices of Taiwan, Malaysia, Indonesia, Thailand, Philippines ended up as losers.
The Indian market is fundamentally strong and there is no such need for a correction at this point of time, insists Vijay L. Bhambwani, chief executive of BSPLindia.com, an investment advisory firm. “The Indian market is quite unique. Global problems do affect us, but we are not completely reliant on overseas fund flows.”
Still, the overall market shows a bearish bias, says Sanjeev Gupta, managing director of Delhi-based Nexgen Capitals Ltd. And Nitish K. Vakharia, a director of Mumbai-based Falcon Brokerage Ltd, says that “a correction is overdue” despite Monday’s rally.
V.V.L.N. Shastri, country head of Firstcall India Equity Advisors Ltd, predicts the Sensex will cross the 16,000 mark in a fortnight. “There is no logic in the argument that all the emerging markets will continue falling over a domestic issue in the US markets,” he claims. “Before crying for a correction, one needs to analyze if there is a strong need for a correction. As long as the valuations remain good, the market will continue to rally.”