In the month of November, international investment banks such as Morgan Stanley and Goldman Sachs also upped their targets for Indian equities and turned bullish.
It was not just Sensex and Nifty that had been on a record breaking run this month, they had been accompanied by foreign investors who recorded their highest ever month-to-month inflows. Foreign Institutional Investors (FII) nearly purchased as lots of domestic stocks as they had sold in the month of March. Data from NDSL shows that through November foreign inflows into domestic equities had been at Rs 60,358 crore — their highest quantity they have ever pumped into Indian stock markets. Back in March, Rs 61,973 crore worth of domestic stocks had been sold by FIIs and FPIs.
Improving macroeconomic information, reopening of the economy, international liquidity, and an elevated appetite for equities is what is pulling these foreign investors towards India. In the month of November, international investment banks such as Morgan Stanley and Goldman Sachs also upped their targets for Indian equities and turned bullish. While Morgan Stanley expects Sensex to attain 50,000 points by December of 2021, Goldman Sachs has pinned a target of 14,one hundred on Nifty for 2021.
Inflows may possibly slow down in the coming month but are not probably to come to a screeching halt. “FII’s have continuously pumped in money in the last one month while in index futures too they have been bullish. They have rolled their long positions and their ‘Long Short Ratio’ at the start of new series is at 76.6%,” stated Ruchit Jain, Senior Analyst – Technical and Derivatives, Angel Broking. The Long-quick-ratio has elevated from 44.54% in the earlier series.
Although the derivative information suggests that the momentum in markets is probably to continue, FIIs may be in the overbought territory now. “FIIs index futures data signifies they are overbought in Indian market and any unwinding of longs or fresh shorting may lead to a correction in the market. Thus, some cautious approach should be adopted at these levels,” stated brokerage and analysis firm Motilal Oswal in a current note. Voicing equivalent views, Nirali Shah, Senior Research Analyst, Samco Securities stated that it is time to be cautious given that the existing liquidity and optimism-led rally is majorly driven by marketplace sentiments.
“During such a mad chase for momentum investors often disregard fundamentals. Taking a holistic view on FPIs and DIIs, it can be said that liquidity can still take markets higher, albeit any unpleasant event can cause corrections in bourses. Risk and reward are unfavorable for both traders and investors currently,” Nirali Shah stated. She believes that it is unlikely that FPIs will invest aggressively in the coming weeks with the MSCI rejig now completed and dusted.