Indian stock market is booming despite negative signals from global markets. On Wednesday, major Indian stocks opened slightly higher but pared gains in the morning session against the US. As of 11:20 AM, the Nifty was trading at 18,257.65 points, while the Sensex was down 36.95 points. The VIX index, a gauge of market fears, rose 4.22% to 13.2 levels.
According to market analysts, open buying by foreign investors was the main driver of the consolidation. Dr VK Vijayakumar, chief investment strategist at Geojit Financial Services, said in a note to Investing.com that total purchases by foreign investors stood at Rs 15,767 crore. This sudden change in FII (Foreign Institutional Investors) policy also led to short covering which helped the bulls.
Foreign portfolio investors (FPIs) poured Rs 10,850 crore into Indian equities in the first week of May, up from Rs 11,630 crore last month and Rs 7,936 crore in March. This sustained buying by foreign investors fueled the Indian stock market, which was largely responsible for the uptrend.
With bulls currently dominating the market, the rally is likely to take the market to the Nifty's all-time high of 18,887, which is just 3% away from the benchmark's current level. The Nifty50 touched a low of 18,323.15 on Wednesday, indicating signs of strength in the market.
This continued buying by foreign investors is not limited to the Indian stock market. According to Bloomberg data, global investors poured $39.4 billion into emerging stocks and bonds in April, the most in three years. Emerging market stocks took in $21.1 billion in April, with Indian stocks the biggest gainers.
The reasons for this persistent buying trend by foreign investors in emerging markets like India can be attributed to several factors. First, low interest rates in developed countries force investors to seek higher returns in emerging markets. Moreover, a weak dollar has made emerging market assets more attractive because of their dollar value. Third, economic growth in emerging markets, especially in India, encourages investors to invest in these markets.
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