Foreign investors are cautious about expensive valuations of Indian stocks, but investments from domestic investors are increasing in them. According to Swiss brokerage house UBS, foreign investors are questioning the bets being placed by domestic investors. They feel that how sustainable this attitude of domestic investors will prove to be in the near term, cannot be said. Brokerage house UBS has said in a report that the recent stance of foreign institutional investors (FIIs) is confirming this. In the current September quarter, FIIs have pulled out $1.1 billion from the market so far.
increased investment by domestic investors
FIIs may be withdrawing money from the market but investment from domestic investors is increasing. Domestic investors bought shares worth $5 billion in the June quarter. According to the report of UBS, at this time the retail direct ownership has increased to the top of 12 years. Fund flow from domestic mutual funds has turned positive after four quarters. In fact, despite the fears of the third wave of COVID-19, there has been a boom in vaccination and the earnings of companies have also increased. So the market sentiment has improved. Mutual funds are taking advantage of this opportunity.
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Positive outlook on growth rate
The UBS report said that after the expensive valuation of the shares, there is very little scope for re-rating. If the low absolute returns continue, the investment of retail investors may come down. The brokerage house says that India’s GDP growth rate may remain below 8.9 percent. If the economy is fully opened, then in July-September, the growth rate in GDP can increase to 15 percent. GDP declined by 11 per cent in the June quarter. According to UBS, 40 percent of the population in India can get the corona vaccine by December. Up to 40 percent of the adult population can be vaccinated.