NEW DELHI: After September 21 this year when US Federal Reserve Chair Jerome Powell hiked interest rates by 75 basis points for the third consecutive time to tame decades-high inflation, Sensex has lost over 1,500 points while FIIs have withdrawn over Rs 27,400 crore from Dalal Street.
Barring July and August, FIIs have been net sellers on Indian stock exchanges in all months of the calendar year 2022. The total outflow on a YTD basis stood at Rs 176,247 crore.
FIIs have been net buyers on Dalal Street only on 3 occasions since the Fed hike, shows market data.
In September, a bulk of the FII selloff was from 6 sectors – IT, oil and gas, metals, financials, realty and power. IT stocks faced most of the brunt with an outflow of nearly Rs 9,200 crore in September, shows NSDL data.
Analysts say that had it not been for stronger domestic flows, cuts in Sensex would have been much deeper. Equity mutual fund inflows doubled to over Rs 14,000 crore last month.
While several global equity indices are in bear grip, Nifty has lost just 1% on a year-to-date level, giving rise to decoupling theories of the Indian market.
“India’s outperformance is not an aberration. It is well warranted. Indian markets have been quite resilient given the strong domestic economy. The domestic data is encouraging, whether it is credit growth, personal loan growth, GST collections or auto sales,” Surjitt Singh Arora of PGIM India Mutual Fund told ETMarkets.
Stating that it is wrong to assume that the Indian market has decoupled, he said although risks emanating from global events and geopolitical actions are not ruled out, India is in a relatively good stead.
During the last 12 months, global market cap has declined 22.3%, while India’s m-cap has declined only 4.3%. Analysts find India’s valuation premium of over 100% over emerging market rivals discomforting.
“India’s valuations are expensive in the short-term, fair in the medium term and cheap from the long-term perspective. 20 PE for FY23 is expensive, but 17 PE for FY24 is fair and from a longer-term perspective India is cheap since no other emerging market has the potential for growth and corporate earnings that India has,” said Dr VK Vijayakumar, Chief Investment Strategist at
.
He said short-term high valuations can trigger a market correction if the global markets correct on ‘strong and long recession’ fears.
Global brokerage firm BofA Securities had recently reduced Nifty target to 17,500 from 18,500 on weakening macro, higher crude oil prices, rupee depreciation, global slowdown and China revival.
(With 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)
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