Sensex rises 59,000 on strong buying in FPI

The index was trading 0.88% higher at 59,332.60.

US retail inflation slowed to 8.5%, below estimates of 8.7% in July and below 9.1% in June, raising hopes that the Federal Reserve may be less aggressive in raising interest rates. This also increases the chances of a soft landing in the US. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said the market is likely to rise in the near term.

Foreign Portfolio Investors (FPIs), who had sold more than 2 trillion worth of equity from six months to June 30, became net buyers 6,719.75 crore in July after nine months, helping benchmark indices gain over 15% from July lows. FPI buying picks up in August 18,733.3 crore till August 10. As per provisional figures, they were net buyers of Shares worth Rs 2,298.08 crore on Thursday. Softening commodity prices, cooling crude oil, and expectations of a rate hike being behind the peak of the cycle also supported gains.

Analysts believe that India continues to be one of the best markets at the moment and valuations are not expensive relative to growth, which is providing relief to the selling of FPIs.

“We believe India is best positioned within Asia to deliver domestic demand alpha. Its cyclical recovery will be sustained by structural factors,” analysts at Morgan Stanley Research said in an August 9 report. In 2022-23, Morgan Stanley expects India’s growth rate to average 7%, the strongest of the largest economies, contributing 28% and 22% to Asian and global growth.

Mitul Shah, Head of Research, Reliance Securities, said FIIs are also expected to remain net buyers as valuations are fair compared to the recent past. Shah expects a strong economic rebound, general commodity prices, inflation within the target range, and better visibility in the second half of FY23, which will lead to a strong rebound in the equity market and the end of Q2 and the beginning of the second quarter. FII will flow. Half of FY23.

The rupee, which had touched a dollar from the level of 80 in the spot market, has also strengthened slightly, which is positive for FPI inflows. The rupee is not likely to depreciate much in the near future. “The overall bias is on the spot for USDINR between 79.00 and 80.00 levels,” said Anindya Banerjee, Vice President, Currency and Interest Rate Derivatives, Kotak Securities Ltd.

FPI inflows remain strong, especially in FMCG, banking, financial services and insurance (BFSI), capital goods and construction materials.

Notably, FPIs that have been net sellers in the BFSI segment since November have turned buyers in July, and analysts attribute this to banks with strong credit growth, strong asset quality and expanding net interest margins.

Shopping activity has also improved in the electricity and healthcare sectors; However, FPIs have remained net sellers in the oil and gas, metals and technology sectors since early July.

Meanwhile, India’s inflation data due out on Friday will be closely monitored, analysts said.

Siddharth Khemka, head of retail research, Motilal Oswal Financial Services Ltd, said, “The benefits of the recent moderation in commodity cost are likely to be reaped in the second half of FY23, which will boost corporate profitability. Thus, the positive momentum in the market is likely to continue even though bouts of volatility cannot be ruled out in view of mixed global cues and rising geopolitical tensions, Khemka said.

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