FPIs renew interest in equities
The aforementioned sectors account for 60 per cent of incremental profits of the Nifty-50 Index.
MUMBAI: After falling behind in 2017, foreign portfolio investors have taken the lead in fresh investment in equities this year on expectation of a stronger recovery in corporate earnings growth going ahead.
In January till date, overseas investors have made a net investment of Rs 11,759.24 crore in equities pushing the benchmark equity indices to their all-time high.
The domestic mutual funds, which had invested over Rs 1 lakh crore in equities last year — more than double the amount invested by overseas investors, have so far bought shares worth Rs 5,007 crore in 2018.
According to experts, a better than expected quarterly numbers reported by some of the index heavyweights for the quarter ended December 2017 along with expectation regarding a prudent budget giving more focus on rural and infrastructure sector with minimum fiscal slippage are helping the markets to maintain their bullish sentiments.
“The results season and recent domestic and global cues have increased our confidence in FY19 earnings estimates of over 20 per cent growth for the Nifty-50 Index,” said Kotak Securities.
“We note that a large portion of the incremental profits for our coverage universe and Nifty-50 Index comes from sectors such as PSU banks, metals and mining on the back of improved global outlook and price increase for Coal India and oil & gas due to higher prices. The aforementioned sectors account for 60 per cent of incremental profits of the Nifty-50 Index. However, we would not quibble too much about the quality of earnings given the drought in earnings over FY15 to FY18,” it added.
Ahead of elections, DBS Bank noted that the markets are seeking direction on this year’s themes and policy priorities in the budget, which is likely to give greater focus on rural infrastructure and agri reforms along with job creation. “Industry players are watching the full rollout of promised cut in the corporate tax rate from 30 per cent to 25 per cent (announced in 2016), after the change was limited to smaller firms in last year’s budget,” DBS Bank said.