FPI flows into India continue unabated in July, too. India is the largest recipient of FPI flows YTD among emerging markets, says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Till July 21, FPIs have invested Rs 43,804 crore in India. This figure includes investment through stock exchanges, primary market and bulk deals.
FPIs continue to invest in financials, automobiles, capital goods, realty and FMCG. FPI buying in these sectors have contributed hugely to the surge in prices of stocks in these sectors and the Sensex and Nifty scaling record highs, he said.
The concern, however, is the rising valuations. At high valuations some negative triggers can lead to sharp correction. This happened on Friday when the Sensex tanked by 887 points on negative news from Infosys and HUL, he added.
The US Dollar Index (DXY) has slipped below $100 for the first time after April 2022. When the Dollar Index falls, the Indian Rupee appreciates and the dollar weakens, which leads to increased fund flow from FII and FPIs, SBI Securities said in a report.
The heavy inflow helps the market to surge higher, SBI Securities.
Last week, the volatility index India VIX ended at 10.68, which was the lowest closing since December 2019. This decline in volatility indicates that there is less fear in the market and investors have adopted risk-on mode, the report said.
Hence, overall market structure looks very promising as the formation of higher high and higher low is seen on the chart and there is stability in volatility.
Stability of volatility over time is a good thing because it allows market participants to estimate maximum potential gains and losses with greater accuracy.
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