Direct Equities: Results strengthen long-term outlook

Domestic Institutional Investors (DIIs) remain steadfast buyers in May with USD 796mn worth buying. DIIs have sold stocks only on 4 days in May, which explains the outperformance of the broader market. FIIs however have turned bearish again despite large block deals like ITC, Indigo etc. CYTD has seen cumulative FII net outflow of USD 12.9 bn (May net outflow : USD 11 mn) while DIIs bought USD 33.5 bn worth equities.

All sectoral/thematic indices were positive except FMCG and Pharma while Media outperformed. In Q4FY25, India’s GDP exceeded consensus at 7.4% (vs consensus est. of 6.8%), primarily driven by a sharp rise in government capital expenditure, particularly in construction, which led industrial growth. This along with IMD forecast of an above normal Monsoon bodes well for the overall market health.

Highlights

• The MSCI EM Index gained c.2.1% (in USD terms), reflecting a modest rebound amid ongoing global uncertainties. Chinese equities (particularly tech) led the recovery of MSCI Index .
• PAT growth for Nifty50 and BSE 500 has been at 0.5% and 8.7% respectively in Q4FY25.
• Bloomberg data indicates that the 1yr-fwd P/E of Nifty-50/BSE-500 are 11%/14% above their 10-yr avg. whereas 1yr-fwd P/E of Nifty-Midcap100/Nifty-Smallcap100 are at a 29%/58% premium to their 10-yr avg.
• In terms of yield-to-earnings ratio, valuations are still within historical averages, suggesting markets aren't stretched when viewed through a relative lens.