Foreign investors have returned to the Indian markets this month, and primary market has been a steady source of profit for them which is likely to continue
MUMBAI — Foreign investors have returned to the Indian markets this month, and primary market has been a steady source of profit for them which is likely to continue, analysts said on Sunday.
The declining trend in foreign institutional investors (FII) selling, which started in early October, continues.
FIIs turned buyers too in many days of October. Total FII selling through exchanges (up to October 25) stood at a negligible INR 3,363 crore, as per NSDL data.
“The long-term trend of FIIs continuously buying/investing through the primary market continued in October, too, with a total investment of INR 10,692 crore (up to October 25). Investing through the primary market has been a steady source of profit for the FIIs and, therefore, this trend is likely to continue,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
On Thursday, FIIs turned net sellers to the tune of Rs 1,166 crore after five consecutive days of buying, reflecting profit-booking activity. Domestic institutional investors (DIIs) remained supportive with net inflows of INR 3,893 crore.
“FII inflows and upbeat management commentaries could help sustain positive market momentum, though intermittent profit booking cannot be ruled out. Meanwhile, any progress on the India-US trade deal front, could further uplift investor sentiments,” said Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.
Going forward, there are certain important factors that may lead to FIIs turning buyers in India, said analysts.
One, the valuation differential between India and other markets has declined discouraging further FII selling in India and moving monies to other markets.
Two, earnings growth in India is slowly picking up and will gather momentum in FY27.
“Three, the Diwali sales this year across large number of goods are an all-time high indicating a resilient economy and robust consumption. Four, there are indications of a trade deal between India and US which can substantially improve market sentiments,” said Vijayakumar.
These factors have the potential to turn FIIs into buyers in the Indian market. However, at higher levels they may again turn sellers thereby restricting a sustained rally in the market, analysts maintained.