The latest up-move follows four months of weak performance. Between December 2022 and March 2023, the Nifty50 dropped nearly 7.5 per cent, underperforming most global markets. This decline led to moderation in the valuations of Indian equities, helping them play catch-up with global peers. The domestic indices outperformed most global peers in April.
The note further said the Indian equity market may post a strong recovery in the second half of the year as major central banks are likely to end their rate-hike cycle given the dwindling global growth outlook.
At the start of the month, FPIs built massive short positions. However, a recovery in global markets, following an intense sell-off triggered by the collapse of Silicon Valley Bank, forced them to cover their short positions.
India is considered to be an attractive destination for investors given its superior growth rates and promising demographic.
Going forward, the US Federal Reserve’s monetary policy announcement next month will be one of the key factors influencing market trajectory.
“The markets have had a reasonably nice run. And there could be a bit of a pause now. Still, expectations are that the Fed is going on hold. Even the latest US economic data was mixed. But the markets are going to look through and hope that the Fed may hold interest rates, and take a more positive view that rates are going to come down at some point,” said Holland.