With foreign portfolio investors (FPIs) shopping for stocks in 29 of the past 31 sessions, their purchases in 2016 so far are close to $6 billion. Of this, close to $3 billion has been invested in just over a month between July 8 and August 19 causing the Sensex to gain 3.2%. Between January and now, the Sensex has risen 7.15% closing Tuesday’s sessions at 27,990.
The Indian market has been a middler performing better than some peers but lagging others. While the inflows have been strong so far the story was much the same in 2015 when close to $seven billion had come in. However, with a big sell-off towards the end of the year net inflows in 2015 stood at around $3.3 billion.
Taiwan has attracted the most foreign fund inflows this year of $13.6 billion followed by South Korea which has pulled in $ 8.6 billion. Indonesia, however, hasn’t been a big destination with inflows of $3 billion moving into its equity markets in the year so far.
Consensus estimates peg the one-year forward trading multiple for the benchmark Sensex at 16.22 times , somewhat more expensive than Taiwan’s at 13.76 times. Korea is far cheaper, trading at 10.69 times, one-year forward estimated earnings.
Domestic institutional investors (DIIs) have been net sellers so far in 2016 offloading stocks worth Rs 597.96 crore. This could be attributed to a reversal in flows from insurance companies, according to ICICI Securities. Ramdeo Agrawal, joint Managing Director of Motilal Oswal attributed high PE levels as a cause of concern among domestic investors. ” There is a concern among investors that markets will correct very sharply. The market is valued slightly lower than what it was in 2007-08 and investors are worried.”
The author is Sundar Sethuraman