Direct Equities: India’s structural edge

In a multi-polar world, the positive macro narrative for Indian equities remains intact – strong GDP growth, adequate political stability, manageable inflation and case for larger share of FPI flows as country weightage in global benchmark indices rises. Despite some cool-off in pockets of narrative stocks, robust DII/retail net inflows into equities (Direct/MFs) again ensured that ‘buy-on-dip’ strategy remains in play for benchmark indices. Sectoral gains were led by Pharma, IT, and Consumption.

Highlights

• Equities saw brief risk-off in early-August on the back of escalated geopolitical tension in the Middle East, Yen-carry trade unwinding after BoJ hiked policy rates and US economic data raising fear of a hard landing for the economy.
• While investor sentiment & domestic inflows into equities remain exuberant (FYTD net FII/DII inflows = US$3.8bn/US$24bn), pricey valuations amid slowing earnings growth = low near-term margin of safety to any adverse systemic/geopolitical event.
• IT, Pharma, FMCG find preference amidst a volatile market in August, whereas Realty and PSU banks lagged.
• India stood out amongst its peers when it comes to foreign investor interest.