Foreign investors pour $4B into Indian equities amid market highs
Foreign investors have injected over $4 billion into Indian equities since June, propelling the country's stock markets to record highs. The investment spree kicked off in early July with more than $1.3 billion invested, following a net buy figure of $3.18 billion in June. This surge in foreign investment counterbalances the selling witnessed in April and May.
Election results spur foreign investment in Indian markets
During the election period from April to May, foreign investors were net sellers due to uncertainties about the outcome. However, they resumed buying after the results indicated a return of the BJP-led NDA government, albeit with fewer seats and without a majority for the BJP alone. The continuity of key portfolios under the Modi government signaled policy stability, reducing susceptibility to demands from allies.
Indian markets hit record highs amidst political stability
Market analysts predict minimal impact on earnings and growth due to the pro-growth stance of the BJP-led NDA and the resilience of the economy despite a slimmer mandate for the NDA alliance in 2019. In July, the Nifty crossed the 24,000 mark and Sensex topped 80,000, both reaching record highs. Despite volatility during the Lok Sabha election period, markets remained strong with a 25% YoY surge by June 2024 for Nifty.
Indian companies' market cap exceeds $5 trillion
The market cap of listed Indian companies has surpassed $5 trillion, accounting for 4.2% of the global market cap. Analysts are keenly observing for signs of policy direction from the forthcoming Union Budget, which is expected to set priorities for the next five years. There is anticipation that additional funds from RBI dividends may be used to support economically weaker sections and middle-class consumers, potentially boosting consumption ahead of state elections in October-November.
Ongoing reforms expected to revive private capital expenditure
Analysts predict that ongoing reforms and macroeconomic tailwinds will stimulate a revival in private capital expenditure (capex), benefiting sectors such as industrials, cement, infrastructure, and PSU banks. New technologies and privatization are expected to attract investors to power, defense, and railways sectors. Real estate is favored for its growth outlook and potential rate cuts, while PSU banks are attractive due to their discounted valuations. Small caps are seen positively for their cyclical upturn and strong earnings growth.
