D-Street's $489 billion rally is winning back global funds

Synopsis

Global funds are flowing back into Indian stocks, fueling the market's impressive rally this month. Optimism surrounding India's domestically-driven economy, which is expected to weather the global trade war effectively, is attracting foreign investors. This resurgence follows a period of net selling and has contributed to a significant boost in the Indian market's value.

Global funds are returning to Indian stocks, signaling that this month’s rally in Asia’s best-performing equity market likely has more legs.

Having largely been sellers in the months since Indian benchmarks scaled records in September, foreigners are coming back amid growing optimism that a domestically-driven economy will make the South Asian nation withstand the global trade war better than most peers. A sharp advance from this month’s low already boosted India’s market’s value by $489 billion to nearly $4.4 trillion at the end of last week.

Overseas funds bought $589 million of Indian shares on a net basis last Friday, marking an eighth straight day of purchases, according to data compiled by Bloomberg. The buying streak means they have now invested about $680 million in April. At one point, they were sellers of more than $3 billion for the month.

“Foreigners are coming back as India is perceived to be relatively better placed than other emerging markets due to its faster economic growth despite the trade war,” said Sneha Tulsyan, an investment analyst at Tokio Marine Asset Management International Pte. in Singapore. Expectations of further monetary easing and moderating crude oil prices will continue to drive a “positive narrative” for India, she said.

Bloomberg

Global money was the missing piece in India’s recent rebound that was aided by purchases from local investors, an interest-rate cut and also the central bank’s cash injections — which wiped out a monthslong cash deficit in the financial system. Money managers at Franklin Templeton and Federated Hermes have in recent days touted India as a bright spot amid global tariff uncertainties, while UBS Group AG has abandoned its long-held bearish view on the market.

Sentiment may get a further lift from US Treasury Secretary Scott Bessent’s latest comments, who said in an interview with CNBC that he wouldn’t be surprised if a trade deal with India is the first to be announced.

The benchmark NSE Nifty 50 Index has risen over 3% in April, almost double the gain in the broader MSCI Asia Pacific Index.

The challenge for Indian stocks comes from relatively expensive valuations as well as rising tensions with neighboring Pakistan after last week’s militant attacks in the northern region of Kashmir that killed 26 people. Some analysts have also warned of the risk of earnings downgrades for the market.

Bloomberg

“Foreigners will continue to chase India as it offers fantastic opportunity to capture strong demographics, economy and upcoming global supply chains,” said Sumeet Rohra, a fund manager at Smartsun Capital Pte. “Any dip due to the border tension will be an opportunity to add.”

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