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| Dalal Street rally likely to continue on strong foreign inflows |
| Mehul Shah / Mumbai Feb 06, 2012, 00:25 IST |
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FIIs have poured Rs 15,317 crore in shares so far this year, against last year’s Rs 3,417 crore outflow
Bulls seem likely to have an upper hand at Dalal Street, as global investors continue to pour money in emerging markets like India for better returns, concern over European funding eases and US economy shows signs of improvement.
The key stock market indices, Sensex and Nifty, rallied more than two per cent each last week, taking their overall gain this calendar year to about 15 per cent.
Both indices are trading above their 200-day moving average (DMA), considered a bullish signal by many analysts. A break above 200-DMA indicates investors are willing to pay more than the average price of the previous 200 trading sessions.
A strong jobs report in the US on Friday is expected to boost investors’ sentiment further. Nonfarm payrolls jumped 243,000 in January, the fastest in nine months, and jobless rate fell to 8.3 per cent, the Labor Department said.
“The manner in which the market has rallied has raised expectation of more gains. However, one must not lose sight of the risks confronting the market – both domestic as well as external. Things could get a little trickier, as strong money flow is driving the current ascent,” said Amar Ambani, head of research at Mumbai-based IIFL.
Foreign institutional investors (FIIs) have poured Rs 15,317 crore ($3.12 billion) in Indian shares so far this year, Securities and Exchange Board of India (Sebi) data compiled by the BS Research Bureau showed. Last year, they had pulled out Rs 3,417.6 crore as high interest rates, a governance deficit and corruption scandals sapped investors’ appetite.
Global investors have stepped up their search for higher returns, according to US-based fund tracker EPFR Global.
“Flows have again proved a good indicator of changing investor sentiment,” said Brad Durham, managing director at EPFR Global. “The emerging markets equity funds we track have had their best start in six years — in flow terms — while the average portfolio is, in defiance of many defensive forecasts for the first half of 2012, up around 11 per cent.”
Emerging markets’ equity funds, tracked by EPFR Global, took in another $3.5 billion in the week-ended February 1, taking their year-to-date total to $11.3 billion.
In India, investors will keenly watch industrial output data for December, expected to be released this week. Among the important quarterly results coming this week are HUL, M&M, Bharti Airtel, Hindalco, Cipla and Sun Pharma.
Globally, investors will focus their attention on progress of negotiations over a second bailout deal for Greece as well as policy meetings of the European Central Bank, the Bank of England and the Reserve Bank of Australia this week. Data on trade and inflation in China and mortgage applications, initial jobless claims and wholesale inventories in the US will also be watched during the week.
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