Gold Silver Reports — The domestic equity market is flying high without its wings, said Morgan Stanley in a note on Tuesday . A day after the Nifty50 touched a fresh 52-week high, the global investment bank said the market has been lifted by a tide of money that has entered the emerging markets since March .
Indian Markets Flying High Without Wings
The third week of July saw emerging markets bond funds post their second record inflow since the beginning of the month while flows to emerging markets equity funds hit a 54-week high, EPFR data showed. For India in particular, overseas investors have infused more than $2 billion so far in July alone. Net investment of foreign portfolio investors (FPIs) in the stock market dur ing July 1-22 stood at `8,086 crore and `6,917 crore in debt .
The recent equity rally has got little to do with India, which has resulted in higher valuations on most metrics. Reading the 20 Nifty50 charts, Morgan Stanley said there there is potential for further downside, the brokerage said in a note .
The most important chart the one-year forward PE of Nifty-50 is well above the average. Is this an alarming sign? Yes. If liquidity dries out, the Indian market could go into a tailspin.
India’s long-term growth potential remains intact, yet it is difficult to predict when the tide in emerging markets will recede. If that happens, Indian equities may not have legs to stand on irrespective of the long-ter m growth prospects with multiples as high as they are now. — Neal Bhai Reports