New Delhi: FPI inflows into India continued unabated in July as well. VK Vijayakumar, chief investment strategist, Geojit Financial Services, says India is the largest recipient of FPI inflows YTD among emerging markets. Till July 21, FPI has invested Rs 43,804 crore in India. This figure includes investment through stock exchanges, primary market and wholesale deals.
FPIs continue to invest in financials, automobiles, capital goods, realty and FMCG. He said that FPI buying in these sectors has contributed in a big way to the rise in the prices of stocks in these sectors and Sensex and Nifty have reached record highs.
However, a matter of concern is the rising valuations. Some downside triggers at higher valuations could lead to a sharp correction. This happened on Friday when the Sensex fell 887 points on negative news from Infosys and HUL, he said.
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The US Dollar Index (DXY) has slipped below $100 for the first time since April 2022. When the dollar index falls, the Indian rupee strengthens and the dollar weakens, leading to increased fund inflows from FIIs and FPIs, SBI Securities said in a report.
SBI Securities says heavy inflows help the market to jump higher.
Last week, the volatility index India VIX ended at 10.68, the lowest closing since December 2019. The report said that this decline in volatility indicates that fear in the market is low and investors have adopted a risk-on mode.
Hence, the overall market structure looks very promising as formation of higher highs and higher lows is seen on the charts and volatility is stabilizing. The consistency of volatility over time is a good thing because it allows market participants to estimate the maximum potential gains and losses with greater accuracy.