Industrial production may be in a slump but not investor sentiment. The return of foreign institutional investors (FIIs) into the Indian markets and an improving global financial environment have been the key factors behind a stocks rally that has seen the benchmark Sensex climb 32 per cent – or 2,643 points – in the past one month.
It gained 7.6 per cent in the current week ahead of Good Friday to close at a six-month high of 10,803.
That spirit contrasts some ground realities. The Index of Industrial Production (IIP) has contracted on the year, while GDP growth projections have been lowered, with a matching shrinkage in expectations of corporate profitability.
But then, there is also a “no news is good news” mood on the external front and positive announcements at the G-20 summit of elite economies.
“Overall, risk aversion has eased and investors are moving from secure assets to riskier assets,” said Aseem Dhru, chief executive officer, HDFC Securities.
While market discounted all the bad news on economic and corporate front, FIIs emerged as strong buyers with net equity purchases of Rs 4,042 crore since March 9.
“FII purchase in a beaten down market over the last one year has built in a positive investor sentiment,” said Divyesh Shah, CEO, Indiabulls Securities.
Experts, nevertheless, remain cautious, “I expect sensex to rally between 9,000 and 11,000,’ said Dhru. “Some profit booking is expected,” added Shah. However, they see clarity emerging within three months.