New Delhi:
Foreign portfolio investors (FPI) remained net sellers in Indian markets in July so far as they pulled out Rs 9,015 crore from equities and debt securities with the surging markets providing profit booking opportunity amid concerns over rising cases of Covid-19.
According to depositories data, FPIs withdrew Rs 6,058 crore from equities and Rs 2,957 crore from the debt segment on a net basis during July 1-17. The net outflow from Indian markets stood at Rs 9,015 crore during the period under review.
The latest withdrawal has come after investment of Rs 24,053 crore by FPIs in domestic markets in June.
Himanshu Srivastava, associate director – manager research, Morningstar India said "The surge in markets has been providing profit booking opportunities to them. In addition to that, many states have also been implementing fresh lockdown measure to curb rising coronavirus cases, thus fanning concerns that growth in the domestic economy could be pushed further ahead."
“Most emerging markets barring South Korea witnessed FPI outflows this week," Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities stated.
"As the earnings season proceeds we could witness more volatility and higher turnover in Indian markets. This coupled with peak valuations could lead to some kind of profit booking by FPIs. The recent appreciation in rupee could also work in favour of FPIs when they are taking out money from India," Oza added.
According to Srivastava, "globally the scenario is evolving and there are multiple factors which are dictating the direction of foreign flows. On the domestic front, the challenges with respect to rising Covid cases and recovery of economic growth remains and that will continue to be a deterrent for foreign investors." He further said the Indian financial markets will continue to witness rotational trend with respect to foreign flows. Bouts of net inflows and outflows are expected by FPIs in the Indian financial markets, depending on their changing opinion and global trends.
Market movement to hinge on corporate earnings, COVID-19 trend
Indian equities will be driven by a host of factors like corporate earnings, coronavirus cases trend and geo-political developments this week, according to analysts.
Market participants will also keenly watch the progress of monsoon, with experts saying that the farm sector revival will play a key role in lifting the coronavirus-hit economy.
"With no major event, the ongoing earnings season and global cues will continue to dictate the market trend. Besides, the progress of monsoon will also be closely watched," Ajit Mishra, VP – Research, Religare Broking, said.
Globally, the rising coronavirus infections and geo-political tensions have created uncertainty on the economic recovery front.
With India's COVID-19 cases fast approaching the 11 lakh mark, the third-highest behind the US and Brazil, and the death toll nearing 27,000, participants are expected to tread cautiously going forward.
At global level, confirmed COVID-19 cases have crossed 1.4 crore and deaths totalled about 6 lakh.
Markets globally will closely follow developments on the trade and political level between the US and China, according to analysts.
"We would continue witnessing stock-specific action as the earnings season unfold. Though the near-term momentum looks positive, we would advise traders to be cautious, given flaring US-China trade relations, persistent rise in virus cases and implementation of fresh lockdowns in parts of the country," said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.
HDFC Bank will remain in focus on Monday after having announced its June quarter earnings on Saturday.
The lender reported 19.6 per cent rise in its standalone net profit at Rs 6,658.62 crore for April-June 2020; while its income rose to Rs 34,453.28 crore during the quarter.
Other major companies to announce their quarterly results this week are Axis Bank, Bajaj Finance, Hindustan Unilever Limited, Bajaj Auto and ITC.
"Going ahead market participants will closely track the development related to covid vaccine, the rising infection of coronavirus, development on economic activities, corporate earnings and US-China relationship," said Sumeet Bagadia, Executive Director, Choice Broking.