Stock markets are expected to open on a positive note on Monday, signals from trading at Gift City suggest. Domestic markets are expected to maintain the momentum, as foreign portfolio investors stepped up their investments post the US Fed Reserve rate cut. Nifty futures at Gift City are ruling at 25,905, as against the Nifty (Sept) futures value of 25,790 and October futures value of 25,900.

Analysts expect the consolidation phase to continue, but will see some correction at higher levels.

Santosh Meena, Head of Research, Swastika Investmart Ltd, said: Last week was exceptional for the Indian equity markets, with Nifty, Sensex, and Bank Nifty all reaching all-time highs. This surge was largely driven by a 50 basis points rate cut by the US Federal Reserve and it showed no significant concerns about the US economy. Historically, rate cuts in the US have had a positive impact on emerging markets, with India being a favoured bet among global investors. The highlight of the week was the aggressive buying by Foreign Institutional Investors (FIIs), who poured in ₹14,000 crore on Friday alone, though approximately ₹8,000 crore of this was attributed to FTSE rebalancing,” he added.

September has witnessed the second highest inflows in 2024 so far, the last one being in March 2024, said Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services. BDO India Data from NSDL shows that during the current month till September 17, FPIs pumped a net $3,682 million Indian equities, higher than the net monthly flows in six out of eight previous months in the current calendar year.

“Despite global uncertainties, the primary factors that make emerging markets like India a sweet spot are balanced fiscal deficits, rate cut impacts on the Indian currency, strong valuations, and RBI’s approach to keep inflation under control without a rate cut. 

To add, the IPOs announced this year attracted a large chunk of foreign funds, making the Indian capital market buoyant and a lucrative place to shift their position from other riskier countries,” he added.

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said:The trend of FII buying is likely to continue in the coming days. Banking stocks have turned attractive after news of a reduction in the credit-deposit gap. Since banking stocks are fairly valued in this otherwise overvalued market, the buying trend in banking stocks may continue, thereby, lifting the indexes, too. The flood of FII money has appreciated the INR by 0.4 per cent for the week ended September 20. This can boost further FII buying. The concern is the market getting overheated and valuations getting stretched.”

According to Meena, there are no major triggers expected this week, but upcoming macroeconomic data from the US will be crucial to monitor. FII flows will remain a key factor for the Indian equity market, alongside domestic institutional inflows, which will also play an important role. While markets currently seem unfazed by geopolitical risks, these factors could pose a significant threat to the ongoing bullish momentum. “As we approach the September F&O expiry, heightened volatility is likely, making it essential for traders to stay vigilant and adapt to market fluctuations,” he cautioned.

Meanwhile, most Asian stocks are ruling positive, albeit marginally.

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