FIIs will make a comeback to Indian equities as valuations turn cheaper and the rupee gains strength, said Sunil Damania, CIO, MarketsMojo, in a conversation with FinancialExpress.com on why he believed that Nifty 50 could surpass the 20,000-mark by the end of the current year 2023. The strength of India Inc and its improving ROI will lure investors across the globe to the country, making it a “choice destination” for investors, he said. Sunil Damania expects Nifty to end December 2023 at 20100 points, implying about 12% upside from the current levels.
While FIIs were largely sellers for the first two months of the year, March and April saw a reversal of this trend. Damania said that any FPI which moved out of India and instead parked their money in a different country, will find their way back as India continues to remain one of the strongest, growth-centered markets and economies in the world. Here’s a look at the factors that he believed will drive the FIIs back to India:
Indian valuations
India’s share market is turning very attractive for FIIs from the view of valuations, which are now below the 10-year average. Nifty 50’s current P/E multiple is 20.9, while the index’s two year high clocked in at 32.8. The current price-to-earnings ratio of the index is half of the five-year high of 42.
Rupee could appreciate
The rupee depreciation of the last financial year – wherein the domestic currency slipped almost 8% against the greenback – will come to an end, according to Damania. On the contrary, he suggested that the rupee would appreciate, snapping its current falling streak.
India Inc
The return on investment of India Inc is improving significantly, given the confluence of factors. This in turn would make India more attractive to foreign and domestic investors, who would choose to park their money locally.
Once the FIIs return, the domestic investors, including retail investors, tend to follow suit, lending fervor to the momentum of the markets. The trend of active investors declining over the past 8 or 9 months can be reversed and once investors come back to Indian markets, it could drive the benchmark NSE Nifty 50 index to cross the 20,000 mark towards the end of the year.