Shillong, June 27: According to V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, an important feature of the recent rally that propelled the Sensex to a record high was its weak structure and the absence of enthusiastic investor participation.
Vijayakumar points out that the market lacks the momentum needed to convincingly push it to new highs. Additionally, there is no support from the US market, as the S&P rally of 13.6% year-to-date was primarily driven by only 10 tech stocks. Such concentrated rallies are unlikely to be sustainable in the long term.
Although the rally in India is more broad-based, Vijayakumar emphasizes that there is no valuation support to propel the market much higher. As a result, investors should adopt a wait-and-watch approach and look for clearer direction from the market.
The upcoming Q1FY24 results, expected to be announced early next month, will likely influence the market. Investors may wait for cues from these results to identify which sectors will outperform for the remainder of the year.
Analysts anticipate that foreign portfolio investors (FPI) inflows into India will moderate due to rising valuations in the country and the prevailing interest rate scenario. Vijayakumar notes that FPIs have continued their May strategy into June. Globally, Japan has attracted the largest inflows, followed by India. FPIs have been selling in China, South Korea, and Thailand.
In India, FPIs have been significant buyers in the financials, autos, and capital goods sectors, as these segments are performing well and have promising prospects. On the other hand, FPIs have been selling in the IT and metals sectors, which face various short-term headwinds.
As of June 23rd, FPIs have invested Rs 30,669 crore in Indian stocks this month, and the annual FPI equity inflows have reached Rs 59,922 crore.
Looking ahead, Vijayakumar anticipates that FPI inflows will moderate due to rising valuations in India and the prevailing interest rate scenario. In May, FPIs were aggressive buyers, investing Rs 43,838 crore through both the stock market and the primary market.
