Investor Sentiment Turns Robust

The markets are heading ahead with notable gains as FIIs turn net buyers, reflecting renewed investor confidence 

Following a tumultuous fortnight, the Indian benchmark indices have stabilised, trading within a narrow range and posting modest gains. Over the past two weeks, the BSE Sensex added 0.67 per cent, while the Nifty 50 registered a 0.91 per cent gain. The modest gains were driven by volatility stemming from mixed global cues, slow monsoon progress, anticipation surrounding the upcoming Union Budget, and renewed foreign institutional investor interest, evidenced by recent substantial FII inflows.

In contrast, broader indices significantly outperformed their larger counterparts. The BSE Mid-Cap index surged more than 4 per cent, and the BSE Small-Cap index attracted notable investor interest with an impressive 6.58 per cent uptrend. In recent news, Quant Mutual Fund, a leading player in the mutual fund industry, has come under suspicion of front-running by the capital markets regulator. Front-running, an illegal practice, involves an intermediary exploiting advance knowledge of a large pending mutual fund transaction for personal gain.

This development raises concerns about the potential impact on small-cap stocks, as the fund indicated it would need 28 days to liquidate 50 per cent of its small-cap portfolio. On the sectoral front, all indices except the BSE Fast Moving Consumer Goods (FMCG) index reported gains over the past fortnight. According to a Deloitte report, sectors such as FMCG, beauty products, personal care and consumer durables may experience sluggish growth in the near future due to the high volume of post-pandemic purchases, which has created a high base for FY25.

Conversely, real estate, banks, power and metals stocks demonstrated resilience, bouncing back strongly after a volatile week. In the past two weeks, foreign institutional investors (FIIs) have surprisingly turned net buyers, while domestic institutional investors (DIIs) have consistently remained net buyers. FIIs recorded a significant net inflow of ₹11,133 crore, while DIIs further bolstered the market with a substantial net inflow of ₹15,868 crore during the same period.

The BSE IPO index and the BSE SME IPO index, which monitor the performance of recently listed companies through initial public offerings, have soared by 6 per cent and 21 per cent, respectively, over the past fortnight, highlighting robust investor sentiment. India’s retail inflation dropped to a   12-mon th low of 4.75 per cent in May compared to 4.83 per cent in April, as reported by government data. On the other hand, India’s Index of Industrial Production (IIP) declined to 5 per cent in April, marking a three-month low, down from 5.4 per cent in March, according to data from the Ministry of Statistics and Programme Implementation. Stay tuned for further developments.