FPIs go shopping: Markets rebound in mega relief rally

Updated: April 8, 2020 8:47:08 AM

There was some cheer from the expected revision of India’s weight in the MSCI. “We estimate MSCI India's weight in EM to rise by 55bps.

Foreign portfolio investors have been big sellers pulling out some $8 billion in March.

By Urvashi Valecha

Indian stocks roared back to life on Tuesday in a stupendous rally that saw the Sensex soar nearly 9% or 2,476 points to hit 30,067.21. The market was driven up by the positive sentiment in global and Asian markets and was characterised more as a relief rally.

There was some cheer from the expected revision of India’s weight in the MSCI. “We estimate MSCI India’s weight in EM to rise by 55bps. Also, slightly less than a third of current constituents will see an increase in their stock weights whenever MSCI considers this rebalancing. In our estimates, this would imply passive inflows of $1.3 bn,” analysts at Morgan Stanley wrote.

Some strategists, however, remain cautious. “We expect market volatility to remain extremely high in the near-term. We think market movement is dependent on two key variables: the spread of Covid-19 cases in India and the impact on the broader economy and earnings in the near-to-medium term. In the very near-term, the spread of Covid-19 in India will be the dominant variable for the markets,” strategists at Nomura wrote recently. Foreign portfolio investors have been big sellers pulling out some $8 billion in March and $800 million in April till Monday; they are understood to have bought stocks on Tuesday.

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