Indian equities advanced in April on strong global cues and expectations of a revival in the world economy, driven by a series of government stimulus packages. A surprise cut in interest rates by the Reserve Bank of India also buoyed investor sentiment. The central bank cut its twin policy rates by a quarter of a percentage point each last month in order to spur credit growth and accelerate the pace of economic expansion. The improvement in the global investment climate and increased risk appetite also pushed equities higher.
During the month, the Bombay Stock Exchange’s (BSE) benchmark Sensex index gained 17.5%, while the National Stock Exchange’s 50-share Nifty advanced 15%. Mutual funds’ activity remained subdued as they invested just Rs18 crore in equities on a net basis.
Most equity funds missed the rally in April as nine out of 10 funds underperformed the broader indices during the month. Although fund managers reduced their cash exposure to participate in the rally, they were early to book profits and sold Rs11,130 crore of equities last month. Foreign institutional investors pumped in Rs6,510 crore in Indian equity markets, fuelling the rally. It was the highest investment by foreign investors in a single month of the calendar year.
Graphics by Ahmed Raza Khan / Mint