Having booked profit from August to December 2017, foreign portfolio investors or FPIs have staged a strong comeback in January virtually taking charge of the bull rally with accelerated flow of liquidity mainly in large cap stocks or those constituting 30-share Sensitive Index of Bombay Stock Exchange and 50-scrip Nifty of National Stock Exchange.
These benchmarks today surged surpassing 36,000 and 11,000 levels making a mockery of projections issued by several analysts. Including Monday’s Rs 1,567.57 crore net buying, FPIs in the first month of 2018 have so far invested Rs 6,575.25 crore against domestic institutional investors’ Rs 286.15 crore for the current month. The disparity in net-buying is yawning say analysts but welcome the FPIs big bang return to Dalal Street.
The rally besides being a part of global upswing in stocks on account of liquidity glut received added momentum from improving October-December earnings being released by corporate India and financial sector. Information technology segment shares such as TCS, Infosys Technologies, Wipro, HCL Tech are key contributors to the current rally which saw Sensex hopping from 35,000 to 36,000 in barely five sessions.
The Nifty of NSE surpassed 12,000 level proving analysts wrong who were seeing the NSE benchmark at this peak in December 2018. BSE and NSE benchmarks closed for the day at 36,139.98 (+341.97) points and 11,083.70 (+117.50) points gaining 0.96 per cent and 1.07 per cent respectively. Nifty Bank continued it upside momentum to settle at 27,390.60 (+349.40) points increasing 1.29 per cent. Nifty PSU Bank ended 3.97 per cent up at 3,831.95. In Sensex 24 stocks were up and seven down.
For Nifty it was 35:15. BSE market cap at the day’s end was Rs. 1,56,54,254 crore. Global brokerages attribute this current liquidity glut in stock markets to QE or quantitative easing (unwinding bond positions) by central banks.
The Sensex resumed with yet another big positive gap on Tuesday and kept climbing to new highs. In the afternoon session bulls slowed down a bit apparently to facilitate a brief spell of profit taking. Late in the day the rally resumed taking equity benchmarks to their new dizzying highs. HDFC Securities’ Mr Deepak Jasani said: “We are witnessing FPIs’ returning to the buy-side in a big way after a break.
“The forthcoming Budget could aid in determining the future direction of the market from here on.” He credits the turnaround and bull run to improving industrial/economic growth along with big policy announcements related to banks’ recap and ambitious Bharatmala Infra project.
BSE member Mr Ramesh Damani said: “It is a nice round number ~ 11,000 (Nifty). But should investors invest at current level? Well, this is as good as any other level to enter the market. We might see some rotation trade happen by which money will move from small cap to large cap. Broadly the answer is to remain invested in high quality businesses.
“We are fully invested in the market at this point and will put fresh money; but there is always a possibility of a small correction.”
Bank of America-Merril Lynch’s international strategist Mr Michael Hartneti commented: “By the end of Q1 (March 2018) we expect peak positioning to combine with peak profiting and policy to create a spike in volatility. D Street is now a part of global liquidity driven rally that is not showing any sign of abating.