Buoyancy in markets fulled by sustained FPI investments

Private Equity Investors are selling large stakes in listed entities and cashing in on huge profits. In most cases the size of secondary sale through the ‘offer for sale’ mechanism is many times the original issue.

Roughly 42 per cent of the Nifty weightage comes from the BFSI space which is largely banking companies. This sector has done well and is leading the indices from the front. If one were to analyse the markets, valuations have begun to become a tad expensive but not as expensive to warrant a liquidation of stocks.

Markets in India and many parts of the global economy seem to be on a sustained upswing. The US Federal Reserve raised interest rates by 25 basis points earlier this week to a band of 5.25-5.50 per cent which is the highest since 2001.

Is this rally in Indian markets sustainable? It appears that two positive drivers for this rally is the sustained inflow of money from FPIs and the constant inflow from investors to mutual funds through contributions and also monthly SIP. These are ensuring that there is adequate liquidity to fuel the rally.

Elections for the Lok Sabha are still three quarters way and the political stability is a big positive for investors from across the globe. The Indian economy is faring reasonably well in the given circumstances and it continues to be amongst the few that have a decent GDP growth.

Going forward, surmounting 20K on NIFTY will take time to happen but on the contrary, markets falling sharply also is ruled out. There would be a new base which is made at levels which were made during December 22 of 18,650-18,850. This would act as solid support in case of negative or adverse news.