FIIs change their stance, invest $3.2 billion in Indian markets in June


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After two consecutive months of heavy selling, foreign institutional investors turned net buyers in June, purchasing shares worth $3.2 billion – the second-largest monthly purchase after $4.2 billion in March.

This is significant because his recent purchases come after two consecutive months of selling — $3.1 billion in May and $1.04 billion in April.

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The Indian market has been witnessing a massive rally ever since the election results were announced in early June, with the Sensex and Nifty hitting new peaks almost every day during the month. This is when a large section of analysts are predicting a downturn due to high valuations.

Interestingly, these predictions have proven wrong time and again this year, with the Nifty up 11 per cent so far in the current calendar year.

Moreover, both the Sensex and Nifty rose nearly seven per cent in June and over 7.3 per cent in the June quarter. The BSE Midcap and BSE Smallcap indices have performed even better, rising 7.7 per cent and 10.8 per cent in June, and recording quarterly growth of 17 per cent and 21 per cent, respectively.

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Experts believe that FIIs are showing strong positive sentiment by increasing their bullish positions on Indian equity derivatives and even net index futures contracts held by global funds with bullish interest have risen to their highest level in seven years.

Incidentally, if the historical data is to be believed then the market is likely to witness further uptrend in the current month as well.

Barring one year – 2015 – Indian equities have risen in July every year since 2014. Moreover, earnings growth is estimated to be over 30 per cent in the current fiscal year.

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Not to forget the strong support offered by domestic investors, both retail and institutional. Analysts highlight the fact that while Indian markets rallied after the elections, FPI allocations were low and withdrawals totalled $3 billion. They say domestic funds and retail investors are now driving Nifty 50 flows, indicating confidence in India's economy and corporate earnings.

More importantly, analysts believe future FPI restructuring could lead to foreign funds inflows worth $100 billion over the next 3-5 years, as the new government assures economic continuity with policies promoting inclusive growth, agriculture, infrastructure, fiscal discipline and reforms.

This is expected to boost rural demand and overall consumption, which are the key drivers of India's GDP. Amid this optimism, short-term market volatility should be ignored, say analysts.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.


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