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The Indian stock market experienced a positive opening on Wednesday, with both the Nifty50 and BSE Sensex showing gains. This comes amidst a backdrop of international concerns and consistent selling pressure from Foreign Institutional Investors (FIIs). Market observers are suggesting a period of consolidation is likely, supported by strong domestic investment flows. The Nifty50 started above 24,550, while the BSE Sensex was up by more than 250 points. Specifically, at 9:16 AM, the Nifty50 was trading at 24,587.55, reflecting an increase of 100 points or 0.41%. Concurrently, the BSE Sensex was at 80,512.92, marking a rise of 277 points or 0.35%. The market's resilience in the face of ongoing FII selling is noteworthy and highlights the strength of domestic institutional investors (DIIs). VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, has pointed out the recent underperformance of the Indian market compared to its global counterparts. He notes that the Nifty has been consistently setting new lows for the past six weeks, despite positive performance in other developed and emerging markets. This underperformance is occurring despite significant DII buying, fueled by robust inflows into mutual funds. In August alone, FIIs have sold equity worth Rs 18620 crores through exchanges. However, this selling pressure has been more than offset by the massive DII buying of Rs 46272 crores. Yet, the Nifty has declined from 24768 to 24487. Vijayakumar attributes this to several factors, including Trump’s harsh tariffs and the strained relationship between the US and India, which have negatively impacted market sentiment. Consequently, short positions have increased, further pushing the market down. Additionally, tepid earnings growth, elevated valuations, and a modest projection of 8 to 10% earnings growth for fiscal year 2026 have emboldened bears to increase their short positions. He suggests that a sudden reversal in sentiment could lead to short covering and a sharp market recovery. The upcoming Trump-Putin talks may act as a positive trigger, although its certainty is not guaranteed.
Vijayakumar suggests that this is an opportune time for asset allocation, advising investors with a long-term investment horizon of three years or more to accumulate fairly valued large-cap stocks in sectors such as banking, telecom, capital goods, aviation, and select mid-cap IT companies. He believes that the risk-reward ratio in these segments is currently favorable for investment. The article also provides a brief overview of the performance of US markets on Tuesday. US markets largely improved, with indices reaching new peaks following inflation data that indicated minimal effects from President Donald Trump's tariffs. The S&P 500 increased by 1.1%, surpassing its previous record, while the Dow Jones Industrial Average advanced by 483 points (1.1%). The Nasdaq Composite rose by 1.4% to achieve a fresh peak. This positive performance in the US markets could provide some support for the Indian market as well. Asian equities also saw gains, with the Nikkei-225 in Japan reaching a new record. The US dollar remained stable after previous session losses, and Treasury yields increased slightly, with the 10-year rate reaching 4.30%. These global cues are important factors that influence the Indian stock market. Oil prices stabilized on Wednesday, following a decline on Tuesday. Industry reports indicated rising US crude stockpiles, suggesting a potential end to summer demand. The oil market is another important indicator that can impact the overall economic outlook and, consequently, the stock market.
The article further highlights the investment activity of Foreign Portfolio Investors (FPIs) and Domestic Institutional Investors (DIIs). Foreign portfolio investors sold shares worth Rs 3,398 crore net on Tuesday, continuing the trend of FII selling. However, Domestic Institutional Investors were net purchasers at Rs 3,508 crore, providing support to the market and offsetting some of the negative impact of FII selling. The continued participation of DIIs is crucial for maintaining market stability and supporting long-term growth. In summary, the Indian stock market opened positively despite ongoing international concerns and FII selling pressure. The market is expected to consolidate, supported by strong domestic investment flows. Experts suggest that this is a good time for long-term investors to allocate assets to undervalued large-cap stocks. The performance of global markets, particularly in the US and Asia, also plays a significant role in influencing the Indian stock market. The investment activity of FIIs and DIIs is a key factor to watch in determining the direction of the market. Overall, the article paints a picture of a resilient Indian stock market that is holding its ground despite various challenges and uncertainties.
Analyzing the dynamics further, the resilience displayed by the Indian stock market in the face of sustained selling by Foreign Institutional Investors (FIIs) underscores the growing strength and depth of the domestic investor base. The consistent net buying by Domestic Institutional Investors (DIIs), fueled by robust inflows into mutual funds, is providing a crucial buffer against external pressures. This trend suggests a maturing market where domestic capital is increasingly playing a pivotal role in shaping market direction. The observation by VK Vijayakumar regarding the underperformance of the Nifty relative to other global markets warrants a closer examination. While the US market, for instance, has been reaching new peaks, driven by strong economic data and investor optimism, the Indian market has faced headwinds from factors such as concerns over trade relations and relatively modest earnings growth projections. However, this underperformance could also present an opportunity for discerning investors to identify undervalued stocks with long-term growth potential. The potential for a sharp market recovery, triggered by a reversal in sentiment or positive developments on the global stage, should not be discounted. The upcoming talks between Trump and Putin, while uncertain in their outcome, could provide a catalyst for a positive shift in market sentiment. Similarly, any signs of easing trade tensions between the US and India could boost investor confidence and spark a rally.
The recommendation to allocate assets to fairly valued large-cap stocks in sectors such as banking, telecom, capital goods, aviation, and select mid-cap IT reflects a cautious yet optimistic outlook on the Indian economy. These sectors are considered to be relatively stable and well-positioned to benefit from long-term growth trends. The banking sector, in particular, is seen as a key beneficiary of India's expanding economy and increasing financial inclusion. The telecom sector is undergoing a period of consolidation and is expected to witness growth driven by increasing data consumption and the rollout of 5G technology. The capital goods sector is poised to benefit from increased infrastructure spending and manufacturing activity. The aviation sector is experiencing rapid growth in passenger traffic and is expected to continue expanding in the coming years. And the select mid-cap IT companies are well-positioned to capitalize on the growing demand for digital transformation and outsourcing services. The contrasting investment patterns of FIIs and DIIs provide valuable insights into the prevailing market sentiment. The continued selling by FIIs suggests a degree of caution or even pessimism regarding the near-term outlook for the Indian market. This could be due to concerns about global economic conditions, trade tensions, or other factors. On the other hand, the consistent buying by DIIs reflects a more positive view of the long-term prospects for the Indian economy and the potential for sustained market growth. In conclusion, the Indian stock market is currently navigating a complex landscape characterized by both challenges and opportunities. The strong domestic investor base is providing a crucial buffer against external pressures, while the potential for a market recovery remains a distinct possibility. Investors who adopt a long-term perspective and carefully allocate their assets to undervalued stocks in key sectors are well-positioned to benefit from the India's growth story.
Source: Stock market today: Nifty50 opens in green; BSE Sensex up over 270 points