Sensex Rally Lacks Market Structure and Investor Participation, says Chief Investment Strategist
The recent Sensex rally in India that pushed stocks to record highs lacked strong market structure and enthusiastic investor participation, according to V.K. Vijayakumar, the Chief Investment Strategist of Geojit Financial Services. He believes the market lacked the momentum it needed for a significant rally, and there was no support from the US market, as the S&P rally was primarily driven by only 10 tech stocks.
Although India’s rally was more widespread, there is no valuation support to push it much higher, and investors should adopt a wait-and-see approach while looking for clearer market direction. The upcoming Q1FY24 results, expected to be released early next month, may influence the market.
The Indian market’s foreign portfolio investors (FPI) continue to invest in financials, autos, and capital goods, as these segments perform well and have promising prospects. However, they are selling IT and metals sectors, as they are currently facing short-term headwinds. As of June 23rd, FPIs invested Rs 30,669 crore in Indian stocks this month, and the annual FPI equity inflows have reached Rs 59,922 crore.
Analysts expect FPI inflows to moderate as the market in India becomes overvalued, and Vijayakumar predicts that FPI inflows will decline due to the rising valuation in India and the current interest rate conditions. In May, FPIs invested aggressively, putting Rs 43,838 crore in the market through the stock and primary markets.
Overall, investors are advised to exercise caution when investing in India’s market, and wait for clearer market direction before making any significant investments. The upcoming earnings results may provide vital information, and the FPI inflow trends may indicate which sectors will be most lucrative in the following months.
