Will bulls reign on D-Street this Q2? See what 3-year history shows

In the June quarter, benchmark Nifty 50 gained more than 10% and scaled a record high.

The 50-stock index moved past the 19100-mark for the first time ever, backed by strong inflows from foreign portfolio investors (FPIs).

This inflow was triggered by strong corporate earnings growth, encouraging domestic macroeconomic conditions, and easing inflation concerns.

If one looks at the historical performance of the market in the September quarter, the data too, suggests that bulls have enjoyed the monsoon party on Dalal Street.

In the last three years, Nifty 50 has given high single-digit to low double-digit returns in the July-September period, data analysed by ETMarkets showed.

The year 2021 was the best, as the benchmark index gave 12% returns in the September quarter.
In the April-June period, FPIs net invested a whopping $13 billion into Indian equities. This is the highest-ever inflow seen in the quarter in history.

“Sustained FPI flows triggered by India’s steadily improving macros have taken markets to record highs. The major reason for the sustained FPI flows into India is the reversal in FPI strategy,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

In the initial part of the year, FPIs were net sellers in India, but they turned buyers in China on expectations of a rebound in the economy post Covid. However, the prospects of China deteriorated, while that of India improved.

“India’s macros are steadily improving, and GDP and corporate earnings growth have the potential to improve further from here. So FPIs have reversed their strategy to ‘Buy India, Sell China’.

Historical data also suggests that foreign fund flows have been steady in the July-September period. Out of the last three years, FPIs have poured in more than $6 billion in two years in the September quarter.

To take advantage of the growth momentum, global fund managers are recommending dedicated allocations to India within Asia in the second half of 2023.

According to Anu Jain of 360 One Wealth, the recent upgrade in FY24 GDP growth forecasts for India, and stability in rupee against the dollar and other major currencies, will likely be the supportive factors for FPI inflows.

While the overall environment remains conducive for markets, key factors such as the June quarter earnings of companies, trend of monsoon, and policy actions by central banks will be closely tracked, as sustenance of inflows hinges upon them.

(Data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)