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Back to 15K level: The BSE Sensex regained the 15K mark comfortably during last week rally.

In the short-term perspective, the Indian equity market has re-entered the bull phase.

Last week, Dalal Street indices left the concerns over dwindling FII investment flows behind and moved ahead strongly to recover the lost ground. On the domestic front, apprehensions surrounding the standoff over the implementation of the Indo-US nuclear deal have effectively been placed on the backburner, at least till the third week of November.

The GDP growth and inflation figures reconfirmed the belief that the economic fundamentals remained strong so far during the fiscal. However, the external factors such as strong rupee, tardy progress in agriculture, social resistance to change in certain economic areas and firm crude oil price may continue to remain a threat for the monetary and fiscal policy managers in the short-to-medium term.

International investors are reworking the equity strategies for the emerging markets including India The global investors’ perceived safety in certain asset classes and, above all, staying in cash, witnessed in the whole of August, is now being replaced by active tactics. Money flow to Indian stocks is likely to come back to the levels seen till the third week of July.

According to EPFR Global Monitor, cash was directed to money market funds during mid-August as investors pared global allocations amid credit market uncertainty. China, India and Germany equity funds were targets of a mop-up and the financial sector funds attracted contrarian bets.

Global equity and real estate sector funds had their worst week till August 28 of the year and the combined emerging market equity funds had their second worst weekly outflow of 2007. Redemptions from Asia ex-Japan, Japan, Pacific and EMEA equity funds exceeded 1 per cent of their AUM.

The net outflow from Indian equities in August was close to Rs 7,000 crore (considering the provisional figures for August 31). Interestingly, the largely dollar-denominated FII figures got inflated in rupee term as the local currency moved up in value against the greenback in the last couple of months.

On the other hand, local funds pumped in Rs 12,000 crore during the last month, enough to offset the FII outflow in the magnified rupee value.

Market economists feel that the FII outflow in the five weeks in July-August has indeed left some positive impact on the money supply (rather oversupply) front as also in the area of equity ownership.

Domestic institutional investors, who have been playing the second fiddle in the 4-year long rally, had utilised the opportunity during the past few weeks to catch up with the overseas investors. The outflow of dollar-denominated equity investments also eased pressure on the rupee and also the central bank in the short term.

India Inc’ Q2 results season begins barely in a fortnight. Expectations of good, if not better, performance would be aggressively factored in the weeks ahead. The indications are that the overseas investors would not like to miss the bus. If the last day of the August is something to go by, the net positive FII flow this week is almost ruled in.

The market expects the Government to stress on propping up the growth in agriculture and spending on infrastructure, which in turn, would help bolster sentiment for the third quarter. Steel, auto, FMCG and carbon credits may enthuse market in the immediate term.

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