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Around Rs 34,000 crore has been invested into the Indian equity markets by the FIIs in March 2019, helping Nifty to scale 11.3% in Q1-2019 on CAGR basis.
Generally, when the General Elections approach, market investors hesitate to further invest and this negatively impacts Sensex, Nifty and other indices. However, most opinion polls for Lok Sabha Elections 2019, the foreign institutional investors have been pumping money into the Indian equity markets triggering positive sentiments among the domestic institutional investors (DIIs). Around Rs 34,000 crore has been invested into the Indian equity markets by the FIIs in March 2019, which is a record high post-2007. It helped Nifty to scale 11.3 per cent in the first quarter of 2019 on CAGR (cumulative average growth rate) basis.
Elaborating upon the FIIs fuelling Indian indices Sandip Jabuani, Analyst at Narnolia Financials said, "Net Equity inflows for the month of March rose to a 5-month high figure of Rs 11,756 crore after falling for 4 successive months of decline in net inflows. The surge in the FPIs (Foreign Portfolio Investors) equity inflow has propelled markets to witness new highs, as they have brought in fresh inflows worth Rs 33,981 crores into the equity market."
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Giving an idea about the Equity Market Outlook Anoop Bhaskar, Head – Equity, IDFC AMC said, "Fiscal 19 closed on a much happier note as compared to the start of the year. In India, the mood on election outcome became more positive giving a further leg up to investor sentiments. India (as represented by Nifty 50) registered a CAGR of 11.3%, second highest after the US (S&P 500) at 13.5% over the last decade (all returns in US$). India’s 10 year returns clearly outshone that of the Emerging Market Index (up 6.4%) and especially the other BRICS countries. China, during this period, registered a CAGR of 2.9%."
Anoop Bhaskar of the IDFC AMC went on to add that among the sectors, Banking - private sector, PSU banks along with overall Finance including NBFCs all three lead the charge during the revival – up 13.3 per cent; 13.4 per cent and 12.6 per cent respectively. Private sector banks have been the best performing sector in 5 out of the last ten years and have reported just one instance of negative annual returns. Among the cyclicals, S&P BSE Infrastructure Index generated a strong return of 12.8 per cent reflecting the growing optimism on political stability. El Nino warning of a sub-par monsoon in 2019 has already been made by one forecaster. Unless economic activity nosedives dramatically, the earnings growth forecast for FY 20 should hover around 18-20 per cent, driven by Corporate banks and Metal sectors. This takes into account a more subdued earnings growth across several of the Stable segment sectors.
Asked about the reason for such fund flow by the FIIs ahead of Lok Sabha 2019 elections Prakash Pande, Head of Research at Fairwealth Securities told Zee Business online, "FIIs morale in regard to Indian equity market has gone bullish post Opinion Polls 2019 as majority of them have found Narendra Modi led NDA government coming back to power post General Elections 2019." For FIIs, Narendra Modi coming back to power post-Lok Sabha Elections 2019 means continuation of the policies that have been there for last five years, said Prakash Pandey of Fairwealth Securities.
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