Mumbai: The pace of foreign fund flows into domestic equity markets has accelerated in the current month after some of the leading global financial services firms upgraded their outlook on Indian equities. Foreign portfolio investors (FPI) have invested Rs 10,126 crore in the Indian equity markets in July till date, which is the highest in the last four months. Their investment of Rs 6,862 crore in the local debt market in July is also the highest in this calendar year.
“Currently, there is a ‘risk on’ environment in the global markets. Global investors have increased their allocation towards emerging market equities in which India is one of the major beneficiaries,” observed Rikesh Parikh, vice-president, market strategy and equities at Motilal Oswal Securities.
This, however, is in stark contrast to predictions made just a month back after Britain voted in favour exiting the European Union. While India Inc’s Q1 earnings growth reported so far has failed to live up to the street expectation, the markets still managed to climb higher levels amidst persistent inflows from overseas investors.
Last week, Morgan Stanley upgraded its one year BSE Sensex target to 30,000 stating that corporate India’s earnings cycle is turning and it consider India as one of its top picks in emerging market equities.
“Britain’s exit from the European Union (EU) has raised concerns regarding risk to global growth. However, the risk appetite has gone up, as there is a general belief among market participants that the central banks across the globe wouldn’t sit tight for a long time.
Strong liquidity in global financial markets is one of the major factors that is helping riskier assets across the world to rally higher. In India’s case, the progress of the monsoon and expectations regarding the passage of the goods and services tax (GST) bill and recovery in India Inc’s earnings growth further helped the markets to sustain their positive momentum,” added Mr Parikh.
On Wednesday, Japanese Prime Minister Shinzo Abe said his government would unveil a massive stimulus package of over $265 billion (28 trillion yen) next week to boost the country’s flagging economic growth. Global markets are anticipating similar measures from the European Central Bank (ECB) during its next meeting.
Additionally, there is a general consensus that the US Federal Reserve would refrain from increasing interest rates in the near term. While Japan’s Nikkei 225 soared 1.72 per cent, the 50-share Nifty ended the day at 8,615.80, up 25.15 points or 0.29 per cent while the Sensex climbed 47.81 points or 0.17 per cent to close the session at 28,024.33.
