In the week leading up to the Union Budget 2024, foreign institutional investors (FIIs) have continued to show signs of buoyancy at Dalal Street following the creation of Modi 3.0. The headline indexes have reached all-time highs ahead of the union budget, which is scheduled on July 23, thanks to the purchasing enthusiasm of foreign investors following the election results.
FIIs have invested about 47,300 crore in the Indian equities markets during June and July. In the first two months of the current financial year, they sold domestic equity shares valued over Rs 34,250 crore. After the recent surge, institutional investors are hesitant to purchase shares at exorbitant levels.
According to respondents to a credible budget survey, investors think that despite their high price tag, foreign investors would buy Indian equities because of the country's promising development prospects and will take advantage of any significant or minor declines in the equity markets. Some, on the other hand, think that foreign businesses will also consider less expensive and more alluring areas, such as China. And as per Shrey Jain, Founder and CEO of deep discount broker SAS Online, the Indian economy is in the strongest position of any major economy in the world, according to. Jain also thinks that local market values are not exceptionally low.
"Given their lower values, many FPI find other emerging markets, such China, to be more alluring. The Indian government's commitment to the goals of budgetary restraint and economic growth should be reaffirmed in the Union Budget. This ought to motivate FPIs to increase their investment in Indian stocks," he continued.
Alternatively, DII's 2023. They invested an additional Rs. 1 lakh crore after buying stocks valued at Rs. 1 lakh crore in April and May, according to Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities. No downturn in domestic investment is apparent to us. SIP influx and could have to use that money against their will even in situations where there aren't many profitable possibilities," he stated.
According to Nishit Master, Portfolio Manager at Axis Securities PMS, foreign portfolio investors (FPIs) could be holding off on making sizable new investments in the Indian equities markets till after the budget to evaluate the goals of the present coalition government.
"The high premium values that Indian markets are now trading at might be one factor contributing to the recent absence of notable FPI inflows. This implies that substantial FPI inflows into the Indian equities markets might result from even a little decline," he added.
Moreoever, according to Nitasha Shankar, Head of Equity Strategy at YES Securities, "Valuations have been a concern when viewed in comparison to historical levels, but we remain positive in the long term, especially as the growth outlook improves."
Furthermore, as per to some market players, signals such as the monsoon's direction, the Union Budget, and India Inc.'s performance in the June 2024 quarter might lead to a near-term consolidation of the Indian markets. Domestic benchmark indexes might be range bound following an impressive 11% post-election surge.
Also, Narendra Solanki, Head of Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers cited, "The markets have stabilized following the election shock and, in certain sectors, have set new highs. We are seeing some sector rotation happening and markets consolidating before the budget."
Similar sentiments were expressed by Trivesh D, COO at Tradejini. He stated that the market at record highs might become volatile and stay sideways given the lack of direction. Institutional players take a "wait and watch" stance in these circumstances.
Due to the unpredictability of the general election event risk, FPIs sold shares before to the election. Manish Chowdhury, Head of Research at StoxBox highlighted, "The markets have recovered all of their losses and are trading at all-time highs with the BJP-led coalition government in power at the federal level. Currently, we believe that institutional investors are awaiting more clarity from the budget in terms of capital expenditure in key sectors for deploying meaningful capital in markets."
