Foreign Inflows Fuel Indian Market Surge: A Weekly Market Update

 

Dear Reader,

Foreign Portfolio Inflows Propel Indian Markets

The Indian markets experienced a surge in foreign portfolio funds, propelling the Nifty to conquer Mount 19k and even target Mount 20k. Inflows into India Equity Funds reached their highest level since Q2 2015, while India Bond Funds also saw a record weekly inflow until July 12.

De-Sinofication and Asian Stock Rush

One major factor behind the inflows is de-Sinofication, as Western investors turn away from China and seek opportunities in other Asian markets. This shift in flows has been driven by disappointment over China's recovery, leading foreign investors to seek refuge in Asian stocks.

US Dollar's Impact on Emerging Markets

The weakening US dollar has been bullish for emerging markets, including India. Renowned strategist Stephen Jen predicts further USD depreciation, signaling potential growth for emerging markets. However, some experts caution that the current environment differs significantly from when the dollar smile theory originated.

US Economy and Market Expectations

Despite inflation concerns, the US economy remains robust, and a soft landing is anticipated. While a 25-basis point increase in the Fed Funds rate is likely, a rate cut is expected by March next year, supporting the bullish sentiment for earnings upside in 2024.

Valuation Concerns and Stock Recommendations

With the market rallying rapidly, attention turns to valuations. Some stocks are recommended for buying during weakness or consolidation, while others are considered too expensive. Analysis of companies like HUL shows a gradual recovery in volumes amid high inflation, impacting investor sentiment.

Outlook for Indian Markets

The current market rally has been fueled by foreign fund flows, with India receiving a significant share of these inflows. However, concerns about consumer demand and corporate profitability persist, and investors should carefully assess valuations amid the ongoing bull run.

Stay tuned for more updates and insights in the coming week.