FIIs correct November mistake with $3 billion shopping. Is Santa already here?

Amid expectations of a recovery in central government capex as well as earnings of India Inc in the second half of FY25, foreign institutional investors (FIIs) are taking reverse steps to buy back more than what they sold last month.

As against the $2.5 billion sell-off seen in November, FIIs have already bought Indian stocks worth around $3 billion in the first 10 days of the December month. As a result, the Nifty is already up around 2% this month with bulls betting that the momentum could turn into a strong Santa rally and take the market to new record peaks in the next few weeks before the Budget.

Nifty is only 6% away from its record peak touched in September-end while Nifty Smallcap 100 and Nifty Microcap 250 have already touched new highs to signal that the market is back in a risk-on mode.


Suggesting an upside potential of about 14% in the next one year, Morgan Stanley has already given a target of 93,000 in its base case scenario for Sensex.

"With strong earnings, macro stability and domestic flows, it is hard to argue against India's investment case. That said, potential global growth risks plus a bunching up of IPOs and near-term growth concerns present challenges," said Morgan Stanley's Ridham Desai.

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Quant Mutual Fund said it is beginning to see early signs of a revival. "The timing is right to become constructive on the markets and selectively build positions in certain segments of

the market, which has the potential to recover faster," said Quant's Sandeep Tandon.

Prabhudas Lilladher said it expects acceleration in growth due to the impact of Maharashtra elections, Trump's victory in US Presidential election and expected revival in government capex.

Kotak Securities said it sees limited overall fiscal consolidation, ramp-up of central government capex in H2FY25 and near-term sentiment boost for the market, even as valuations stay rich and fundamentals weak.

"Post-decent 20.3% earnings growth in FY24, we expect net profits of the Nifty-50 Index to grow by 4.9% (EPS of ₹1,036) in FY25, by 16.3% (EPS of ₹1,206) in FY26 and by 14% (EPS of ₹1,372) in FY27E. At 24275 (as on 27th November 2024), Nifty trades at 23.4x FY25E, at 20.1x FY26E and at 17.7x FY27E. FY25 will likely see more broad-based growth across sectors. However, the OMCs will likely drag down overall profits, as we expect their profits to normalise in FY25. Our advice is to invest in select sectors and stocks at current valuations and keep adding on dips," it said.

Analysts say that manufacturing, both domestic & exports is expected to remain strong led by government incentives and China plus one theme.

"IT services exports led by expected improvement in spending in the US would continue to perform in FY25. Also, banks may see some improvement as the liquidity in the system becomes less tight post RBI CRR cut," said Harshad Patil, Executive Vice President and Chief Investment Officer, Tata AIA Life.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)