‘Institutional flows may slow’

Our Bureau Chennai | Updated on August 20, 2020

BofA Securities sees markets consolidating in the near term

Foreign institutional investor inflows into Indian equities so far in August have been robust at $5.2 billion, yet Bank of America- Securities (BofA Securities) thinks net institutional flows could slow as it expect markets to consolidate near term.

Post historic outflows in March ($8.3 billion), FII flows into Indian equities have been positive and continued in July, though active DII flows turned negative, it said.

“Since large sectors led by financials await clarity on the quantum of NPAs/loan restructuring, and IT, telecom, pharma sectors now offer limited room for further upside. That said, we believe FII flows for industrials and materials sectors could turn positive especially given their underweight positioning and improving traction for Make-in India/Government’s capex push,” BofA Securities added.

DIIs are already overweight on industrials but could see an increase in allocation towards the materials sector. “We remain overweight on staples, utilities, select well-run financials; underweight on most financials and discretionary stocks,” it said.

According to BofA Securities’ global quantitative strategy team, global funds continue to be relatively overweight on India versus other APAC countries. Positive India stance is also reflected in contrasting FII flow trends: inflows into India versus outflows from many EMs in July: Malaysia (-$0.6 billion) and Brazil (-$1.6 billion).

“MSCI India's valuation premium to EM is now at 50 per cent vs long term average of 36 per cent. We expect market to consolidate near term but see private sector financials having the scope to drive rally thereafter once clarity on NPAs emerges,” the foreign investment advisory firm said.

Published on August 20, 2020

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