Factors feeding hay to the bulls

Indian markets are making new highs almost every session after hitting its 2016 resistance at 8000 mark. Foreign portfolio investors had turned net buyers in March. Foreign investors poured nearly Rs 2543 crores in May and Rs 966 crore in the first week of June ahead of above normal monsoon predictability. Initially FPIs had pulled nearly Rs 41661 crore in the four months from November 2015 to February 2016.

However, compared to March and April, May saw lower inflows amid India-Mauritius tax treaty. FPIs simultaneously withdrew Rs 4409 crore from debt markets in May. Despite of statement from Janet Yellen about positive interest rate hike in June policy review, Indian markets spurted after comparatively positive results from the corporates.

Moreover, Mutual Fund houses have poured nearly Rs 6500 crore into equities in April and May amounting to Rs 64000 crore invested during the entire year gone by. Growing pace of SEBI regulations to protect the interests of investors and huge participation from retail specifically small-town investors have brought healthy inflows into Indian equities. SEBI has provided more incentives to investors from small towns. All in all equities witnessed net outflow of Rs 575 crore from MFs in April while net inflows of Rs 7149 crore in May.

Going forward we have RBI policy review on Tuesday i.e. June 7. The policy decision would be driven by the monsoon outbreak in coming days and the industrial production (IIP) forecast which is due on Friday this week. The RBI decision taken to that effect would impact the market trend in near future. So far Governor Raghuram Rajan is likely to keep the rates unchanged.