The Indian equity market is moving towards a less volatile structure, thanks to rising ownership by domestic investors and this will lead to a more stable structure going forward, says a report. According to a report by Sanctum Wealth Management, even as foreign investors have been sellers of Indian equities in 2015, 2016, and 2018, the market is within a comfortable shooting distance of all time new highs.
"This is important, because it suggests that the Indian market is morphing towards a more stable and less volatile structure," said the Investment Strategy note by Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management.
As per the report rising SIP flows are a game changer. Foreign investors selling caused a major sell-off in 2015, however foreign investors selling in 2016, 2017 and 2018 has been offset by domestic investors buying and "we expect stabler, deeper equity markets going forward".
The report further noted that equities beat other asset classes even when bought at market peaks, and valuations are likely to stay elevated due to the Modi premium, demographics, financialisation and equity returns. The BSE benchmark Sensex surged about 241 points to end at 35,165.48 today. In the last four years of the Narendra Modi government, the Indian markets have witnessed a significant rise.
Since May 26, 2014, the day Modi was sworn in as the Prime Minister, the benchmark Sensex has risen by 10,207.99 points or 41.30 per cent, while the NSE Nifty spurted 3,246.10 points or 44.11 per cent. The Sensex hit a life-time high of 36,443.98 on January 29, 2018.
The report noted India's macro situation could be improving soon after the Saudis and Russian President Vladimir Putin representing two of the three largest suppliers of oil globally, voiced concerns about high oil prices and stated an intent to increase crude production in the second half of the year.
"A case can be made that crude has peaked for the year. That's great news for equities and India, and markets made a sharp recovery late in the week," the report said adding "equities look better positioned today than they have in some time now".