Chief Investment Strategist, Geojit Financial Services, V K Vijayakumar on Saturday said that FPIs are turning steady buyers in India as evidenced by the net buying of equity worth Rs 11, 823 crores this month up to March 8.
He said that FPIs were big sellers in January and very modest buyers in February. There are mainly three reasons for this renewed interest in India.
First, the Indian market is showing great resilience and every dip is getting bought. FPIs have been forced to buy the same shares which they sold at higher prices, which is a losing game, he said.
Second, US bond yields have been steadily declining (the 10-year yield has declined from above 4.3 per cent to 4.08 per cent now) and this has halted the switch from equity to bonds. The FPI strategy of selling equity in emerging markets to buy US bonds has stopped, he added.
Third, the Indian economy is growing at better-than-expected rates as FY24 GDP growth is likely to be around 7.6 per cent, far ahead of other large economies and this will have a positive impact on corporate earnings and consequently on the stock market, he said.
These positive developments and the sustained flow of funds into the market – both directly and through institutions – can keep the market resilient. However, high valuations are a matter of concern.
He said that the valuations in the mid and small-cap segments are excessive and unjustifiable. Correction in this segment is only a matter of time.
