Nifty is at record high, but more gains likely
₹17,000 crore in the pipeline. Institutional positioning has remained net positive throughout FY24. Foreign portfolio investors (FPIs), although net sellers in September, have been net buyers to the tune of ₹1.58 trillion since April 2023.
Domestic institutions have bought a net ₹35,543 crore worth of shares, while equity mutual funds have received net inflows of ₹46,000 crore during April-August. Retail investors, who primarily operate in the mid-cap and small-cap space, have shown similar bullish sentiment. Yet, how much of this enthusiasm can be justified? Second quarter earnings will start in early October will offer insight into growth acceleration and whether it meets or surpasses investor expectations.
The timing coincides with the RBI's next monetary policy meeting and the onset of the festival season, starting with Navratri, which is traditionally a catalyst for consumer spending across industries like automobiles and jewellery. One must note that this optimism could break down if the Fed decides to hike rates. If that doesn’t happen and the market continues to trend up, market watchers should pay heed to George Soros’ theory of reflexivity.
Soros, whatever you may think of his politics, has been a super successful investor and trader. He explains reflexivity as follows: The vision of market participants is always partial and distorted. Those distorted views influence their actions, which in turn, causes feedback loops.
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