Foreign institutional investors (FIIs) have returned with a bang. Over the last seven trading sessions, they have pumped in close to $2 billion into Indian equities. Most market players expect this to continue as they see macro headwinds easing.After shunning Indian equities for most of the calendar year, foreign brokerages and research houses have re-rated India. With valuations looking attractive (15 X FY 12 earnings), the tide seems to have turned.
The inflows have caused the Nifty to rally 7 per cent in the last two weeks. It is now 114 points shy of its 200-day moving average of 5,746.
RBS, a leading investment bank, said the Nifty could touch 6,000 by year-end, as interest rate issues would be behind India by then. However, the inflows would not be as high as last year, it said.
While India's long-term story remained convincing, the macro-economic headwinds - be it sticky inflation, rate tightening or the policy paralysis - were a big deterrent for FIIs this year.
A lot has changed since then. Ramit Bhasin, managing director and head of global markets, RBS, says, "The headwinds that were impacting India will no longer be there in the second half of the year and we can see a 10 per cent upside by the end of the year from these levels. We will continue to trade in the 5,300-5,800 range till Diwali, before breaking out on the upside. I expect RBI to raise rates by 25 bps (basis points) in July and then pause."
The immediate trigger for FIIs is the fall in crude oil prices and settlement of the Greece debt problem.
Vibhav Kapoor, group chief investment officer, IL&FS, says, "The sentiment has improved because the market has remained at more or less the same level for a couple of years and, hence, with the sentiment improving, it is no more looking expensive to long-only