US inflows at 18-month high; influx in India-dedicated funds most consistent since 2003-2006 period: Elara
US Federal Reserve on the possibility of reversing rate hikes, there is a growing sense of optimism in global financial markets. In the US, flows have surged to an 18-month high, reaching $26.3 billion. Notably, there has been a significant influx of funds into US mid and small-cap investments, which had lagged in the recovery since October 2022, informed the report.
The trend is similar to that of the Indian market. Foreign investor inflows have been strong in broader markets leading them to hit multiple record highs. The benchmark indices have also been on a record-high run in the current month, which has not yet happened for the US market.
Mid and small-cap stocks in the United States have been trading within a narrow range since April 2022. However, with the recent resurgence in US mid/small-cap flows, the brokerage believes, that there's potential for a breakout in this index. If the index indeed breaks out, there's anticipation of a substantial 20 percent rally, propelling it back to its previous highs from November 2021, said Elara.
This scenario suggests the possibility of renewed strength and momentum in the mid/small-cap segment of the US stock market. While the S&P 500 is just 2 percent away from its all-time high, the Russell 2000 index remains 20 percent lower. The report noted that the S&P Equal Weight index is now outperforming the weighted index for the first time since January 2023, indicating a broadening market breadth in the US after nearly 15-18 months.
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