Indian Equity Markets Rally Amid Easing Geopolitical Tensions, Strong FII Inflows, and Robust Q4 Earnings

The Indian equity market is cheering with gains as Nifty surged over 2.5% in the early morning trade today. This comes following the easing cross-border tensions between India and Pakistan. Last week, heightened tensions already resulted in Nifty 50 losing the three-week gaining streak as investors grew cautious

Currently, market sentiment remains optimistic due to easing India-Pakistan tensions, strong Q4 results, and rebound in FII buying activity.

Here’s a look at key reasons that may keep optimism in equity markets in the long run

1. Q4 earnings

So far about 472 companies have reported their Q4 results. Net profit of these companies jumped 12.4% on a sequential basis, which is the best in eight quarters. On a YoY basis, net profit went up by 10%.

2. FPI inflows

Since mid-April, FIIs have infused money worth $5.8 billion in the Indian equities market, a fourth-straight week of positive inflow. Notably, India is topping the list in the emerging markets segment, along with Taiwan and Brazil.

Additionally, investors are shifting away from dollar-heavy US markets and are diverting their funds in emerging markets, like India. Last week, the country saw net inflows worth $326 million, following a $724 million the week before, Elara Capital reported. Interestingly, many investors are reducing their exposure in Chinese markets and redirecting those funds into Indian markets.

3. Stocks

Several companies stand to benefit from the Free Trade Agreement with the UK, but this development is just the tip of the iceberg. If a trade deal between the US and the EU yields positive outcomes, sectors such as manufacturing, electronics, pharmaceuticals, automobiles, and other select industries could experience upward momentum.

Textiles reported a strong rally, however, investors may keep a close watch on defence stocks as India may look forward to boosting defence spending.