MUMBAI :Foreign investors in India’s equity markets have shed their pre-election jitters and remain on a bullish streak ahead of the Union budget, assured of political and economic continuity with Narendra Modi returning as Prime Minister for a third successive term.
Foreign investors in India’s equity markets have shed their pre-election jitters and remain on a bullish streak ahead of the Union budget, assured of political and economic continuity with Narendra Modi returning as Prime Minister for a third successive term.
Nirmala Sitharaman, in her second successive term as India’s finance minister, will present the federal budget for 2024-25 next month.
Premium benefits
35+ Premium articles every day
Specially curated Newsletters every day
Access to 15+ Print edition articles every day
Subscriber only webinar by specialist journalists
E Paper, Archives, select The Wall Street Journal & The Economist articles
Access to Subscriber only specials : Infographics I Podcasts
Unlock 35+ well researched
premium articles every day
Access to global insights with
100+ exclusive articles from
international publications
5+ subscriber only newsletters
specially curated by the experts
Free access to e-paper and
WhatsApp updates
Nirmala Sitharaman, in her second successive term as India’s finance minister, will present the federal budget for 2024-25 next month.
Foreign institutional investors, or FIIs, have turnedbullish ahead of the budget not just in the cash segment of Indian equities but also on the derivatives segment.
The Lok Sabha election results earlier this month returned the National Democratic Alliance to power at the Centre, although Modi’s Bharatiya Janata Party fell short of an absolute majority in Parliament. Early jitters over the economics of coalition politics, however, dissipated as Modi took office on 9 June.
In June, foreign investors turned net buyers of stocks worth ₹18,807 crore, after net selling ₹34,257 crore in the preceding two months.
They have also begun theJuly series of derivatives with a net cumulative bullish index futures position—of 319,115 contracts on index futures such as the Nifty and the Bank Nifty on Thursday, at the June expiry series of derivatives contracts.
FIIs had started the June series with a net bearish position of 297,798 contracts on index futures. These have been covered fully and fresh bullish bets have been created.
“The main concern of FIIs were around the election results,” said Jyotivardhan Jaipuria, founder and managing director at Valentis Advisors, an investment management services firm.
“With that concern allayed by political stability and expectation of reform continuity they have turned buyers once again. The budget and corporate earnings will be the next triggers for them.”
A month for bulls
The bullishness of FIIs is reflected in the rollover data, which show Nifty futures rolls to the July series at 76%, higher than the three-month average of 69%.
Rollover here refers to traders or investors carrying forward their Nifty futures to the July series; derivatives series normally expire on the last Thursday of each month. Rollovers accompanied by rising markets signal long aggression.
“July has historically been a month for bulls, with Nifty settling in the green 90% of the time over the past 10 years, averaging 3.5% returns,” said Abhilash Pagaria, head of Nuvama Alternative and Quantitative Research.
“We expect this bullish momentum to continue as there are still no signs of exhaustion,” he added. “The momentum could lead the Nifty index to touch the 24,500-mark in the next few days, with strong support coming from private banks and IT.”
The benchmark Nifty 50 index scaled to a fresh all-time high of 24,124 points on Friday, before ending the day at 24,010.60. The Sensex scaled a new peak of 79,546 points.
HDFC Bank ranks fourth by weight (3.93%) on the MSCI India Index, behind Reliance Industries Ltd, ICICI Bank Ltd, and Infosys Ltd.
However, Deepak Shenoy, founder of portfolio manager Capitalmind, said while the markets have performed well an allround “exuberance” that has everyone including small-time investors bullish is absent, thus obviating fears of a possible fall given the recent rally.
The Nifty has gained 6.52% since the end of May, while the Sensex has rallied 6.8% in that period. The last phase of the national election was on 1 June, a Saturday.
Coinciding with this rally, retail and wealthy investors were cumulatively net short index futures by 242,961 contracts on Thursday. This was a hedge against long stock futures contracts, supporting Shenoy’s premise of the markets not being “exuberant”.
