INR-USD Movement Will Be Key To Inflow Of FII Funds In India

Indian equity markets are trading close to all-time highs and it doesn’t look like the markets are in a mood to go higher or lower from the current levels in a hurry. There is no incentive for the markets to reach higher ground from the current levels, and at the same time, there is no negative trigger for the markets to slip lower. So expect some sideways movement in the benchmark indices going forward.

However, the new GST tax regime will be instrumental in the coming quarters and will influence market moods. The disruption caused in the short-term due to GST implementation may get reflected in the earnings in the coming September quarter. Markets will be on a roll once India Inc. adapts and adjusts to the new tax system.

The global markets, in spite of increased volatility and uncertainties, look to be in good shape, led by financials and tech stocks in the US. The increase in interest rates in the US markets has led to foreign funds veering towards the US markets and is reflected in the negative FII inflow figures in the Indian markets for the last couple of weeks.

The financial sector is outperforming, not only in India, but also in the US. The Nifty Bank index touched record highs and it does look like the momentum will continue going ahead for quality banks, including a few PSU banks as well. Along with the banking space, investors should do well to focus on metals and infrastructure stocks, which are looking good for investments even at the current juncture, where valuations look fair but not cheap.

There could be a lot of churning happening with quality stocks changing hands and it is possible that there could be some temporary redemption pressure from mutual fund investors. Such a situation can create buying opportunities for savvy long-term investors. Don’t miss buying if stock prices fall. Buy on dips should be a winning strategy. As always, we recommend buying in a staggered manner. 

In this issue, we unravel the impact of GST on various sectors as we believe it might interest you all to understand how GST may influence your portfolios. Do take a look at a few recommendations we have come up with, factoring in the positive GST impact on select companies. Amidst all the negative buzz on the real estate sector, we find that the BSE Realty index is amongst the best performing index over a one year time frame. The Indian real estate industry seems to be faring better than the realty sector in other countries, barring China, in terms of returns. Please delve deeper into the story and find out some interesting observations on demand-supply scenario in the Indian real estate sector. I hope our findings interest you and further help you take a view on the sector.

Keep an eye on the INR-USD movement as the weakening dollar will keep the FIIs happy. In my mind, investors should watch the MSCI’s decision to include A shares in China, as these days these ETFs and indices are extremely influential for equity markets, especially the emerging markets. Huge amount of global managed money ($2 trillion) is benchmarked to MSCI emerging market index and a slight change in weightages affect the amount of foreign money coming into emerging markets such as India.

Stay cautious, invest regularly and be alert on opportunities.