Foreign investors are driving the Indian stock markets to new highs

The Indian economy is going through its worst crisis in recent history. Yet, foreign investors haven’t batted an eyelid.

Since Nov. 1, foreign investors have poured a staggering Rs1 lakh crore ($14 billion) into Indian stock markets.

A combination of low interest rates in the US and the weak dollar has led to inflows into emerging markets like India. Low-interest rates mean the returns on US Treasurys are subdued and hence foreign investors prefer Indian stock markets, where the return could be relatively higher.

In November, the inflows from foreign investors were at a record high. And in contrast, the domestic mutual fund industry was a net seller (sold more shares than it bought).

Driven by the inflow from foreign players, the market has continued to hit new heights. “The rally was propelled by strong FII (foreign institutional investors) inflows, good corporate earnings season, and trends from the festive season, which suggests that the demand recovery continues,” brokerage firm Motilal Oswal said in a report dated Dec. 4.

Even the big global firms like Morgan Stanley and Goldman Sachs have turned bullish on India, citing factors such as accommodative monetary policy, government spending, and peaking out of Covid-19 infections.

But there are also a lot of factors that could prick the pricey bubble of Indian markets. Inflation is still a bone of contention and could hurt the Indian central bank’s attempts to keep the rates low. At the same time, the recovery in demand has been slow with the imports and credit growth showing signs of weakness.

In fact, veteran investors like Shankar Sharma of international investment firm First Global are advising caution. “The probability of this being a suckers’ rally, where all kinds of beaten-down stocks have begun to rally sharply, should be a time to be cautious and circumspect,” Sharma told Rediff.com in an interview.

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Nicholas ‘Nick’ Statman entered the property industry in 2001 and set up a property buying company that quickly established itself as one of the biggest in the sector. During this time the Company successfully transacted on thousands of residential properties across the UK. Nicholas Statman was an early pioneer of the ‘quick sale’ niche market which has since grown considerably with a multitude of companies now operating in the sector. Nicholas Statman has strategically built a sizeable residential and commercial property portfolio with a view to holding for optimum capital growth and a long term passive income. Nicholas Statman has been involved in almost every aspect of the property sector over a 20 year period – this includes buying and selling, development, letting and management and is now involved in the fast growing online/ hybrid Estate Agent industry.

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