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A further decline in US interest rates will likely increase FPI purchases in 2024, particularly in the early months in the run-up to the general elections and the largecaps will be major beneficiaries, said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
FPIs bought shares worth 427.33 billion rupees in the first half of December, marking a fortnightly record, driven by lower U.S. bond yields amid expectations of interest rate cuts by the Federal Reserve.
In the past three trading sessions, an average of ₹18,000 crore worth of 50 stocks comprising the Nifty index was delivered on both exchanges, marking a 66% increase compared to the daily average of ₹10,884 crore in November and of ₹11,265 crore in October.
Analysts said that the selling in financial services is due to concerns around net interest margins peaking out, but added it could be temporary due to steady earnings, stable asset quality in the sector and visibility of capex recovery in the economy.
India's domestic stock benchmarks, the Sensex and the Nifty, reached new highs, driven by increased investments from foreign investors who view India as a bright spot in the global economy. The Adani Group, along with stocks in the metals, auto, and financial sectors, led the surge. However, analysts have cautioned that India's equity valuations have become rich, which may limit further upside potential. Foreign portfolio investors turned net buyers after several sessions of selling, contributing to the rally. Overall, sentiment is positive in global equities following upbeat US economic data.