The Sensex rally was poorly organized and had few investors.
According to V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the recent rally in the Sensex reaching a record high lacked a strong foundation and enthusiastic investor participation. The market lacks the momentum to sustainably push it to new highs, and there is no support from the US market either. The Sensex rally in the S&P index, driven by just 10 tech stocks, is unlikely to be sustainable in the long run.
Although the Sensex rally in India is more widespread, there is insufficient valuation support to drive the market significantly higher. Therefore, Vijayakumar suggests that investors should wait for a clearer market direction. The upcoming Q1FY24 results are expected to influence the market, and investors may look for cues from these results to identify sectors that could outperform for the rest of the year. Analysts predict that foreign portfolio investor (FPI) inflows into India will moderate due to increasing valuations in the country and a rising interest rate environment.
So far, FPIs have continued their May strategy in June, with Japan attracting the largest inflows globally, followed by India. FPIs have been major buyers in financials, autos, and capital goods in India, as these sectors are performing well and have promising prospects. On the other hand, FPIs have been selling in IT and metals due to short-term challenges in these sectors. As of June 23rd, FPIs have invested Rs 30,669 crore in Indian stocks this month, and the annual FPI equity inflows have reached Rs 59,922 crore.
However, going forward, FPI inflows are expected to moderate due to high valuations in India and the increasing interest rate environment. In May, India was the consensus overweight among all emerging markets, attracting the highest investment among them, while FPIs were selling in China.