A strong FPI inflow is fueling the build-up in stocks

MUMBAI The current market rally, characterized by wider equity participation compared to the previous two and fueled by strong foreign portfolio investors (FPIs), is expected to maintain its momentum.

The current market rally, characterized by wider equity participation compared to the previous two and fueled by strong foreign portfolio investors (FPIs), is expected to maintain its momentum.

The percentage of Nifty 500 stocks trading above the 200-day moving average (DMA), a gauge of investor interest, is 73% on June 28, beating 69% in the previous rally that lasted nearly six months to December 1. .

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The percentage of Nifty 500 stocks trading above the 200-day moving average (DMA), a gauge of investor interest, is 73% on June 28, beating 69% in the previous rally that lasted nearly six months to December 1. .

Any stock trading above the 200 DMA is considered an uptrend, and below it is considered a bearish trend. The 200 DMA is the average closing price of the security over a period of 200 days. While the percentage of stocks trading above the 200 DMA is below 91% at the end of the 20-month rally to October 2021, the market has tested a new record in a much shorter three-month period.

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“The rally is broader and the momentum will continue,” said Raamdeo Agrawal, chairman of Motilal Oswal Financial Services. “On the back of the combined HDFC Bank, continued good financial performance. We should see earnings growth of 15-20% across the banking names in FY24, which will be the year the money is made.”

Some market experts expect the rally to widen further, given favorable technical and fundamental factors and the growing prospect of a US recession. They expect banking stocks to lead the next leg of the rally after the imminent merger of HDFC with HDFC Bank and with HDFC Bank on July 1.

“The rally is broader and the momentum will continue,” said Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services Ltd (MOFSL). “The financials sector will continue to perform well on the back of the merged HDFC Bank. We should see earnings across the banking names grow by 15-20% in FY24, which will be a cash-making year, unlike the previous fiscal.

“The bank’s Nifty has underperformed (since late May) and is poised to lead a rally in July on the HDFC merger,” said Jaykrishna Gandhi, head of institutional equity business development at Emkay Global Financial Services. “In our view, until 18,450 Nifty holds, the market bias will remain to the upside…only if 18,450 is breached, the market will trend.”

Gandhi suggested that the US economy could experience a soft landing, despite the possibility of further interest rate hikes.

“U.S. markets continued the positive data, with June consumer confidence hitting the highest level since January 2022, new home sales in May rising 12.2% to the highest level since February 2022, and finally, home prices rose 0.9% in April %. Top 20 cities in the US. The data above suggests that while another rate hike could be in the offing, the likelihood of a recession is receding, leaving room for a soft easing,” he added.

Another positive aspect of the current rally is the higher inflow of FIIs (foreign institutional investors). 95,749 billion in March-June 2023 as compared to 34,597 billion in June-December 2022. The monthly average FII inflow has also hit a new high 23,937 billion, exceeding 5766 crore on average in the last rally and 10,352 billion during March 2020 to October 2021. However, the inflow of domestic institutional investors (DIIs) has been lower at 32,720 crore than 96,073 million in the previous rally.

“The current rally has been broader than the previous rally and it is impressive even considering what preceded the last rally, given the relatively shorter period,” said Rohit Srivastava, founder of analytics firm IndiaCharts.

In the rally between March 2020 and October 2021, the Nifty rallied 148% from a pandemic-induced low of 7,511.1 to a high of 18,604.45. In the subsequent rally from June to December last year, the market rose 24.4% from a low of 15,183.4 to a high of 18,887.60. The current March rally has lifted the Nifty by 14% from a low of 16,828.3 to a record high of 19,201.70 on June 30.

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