(Bloomberg) -- Global investors have returned to Indian stocks, helping to propel the equity gauges to record highs.
Foreign buying on a net basis topped $4 billion since the start of June, more than making up for their sales in April and May, according to data compiled by Bloomberg. India saw the inflow as investors' concerns about policy continuity — following Prime Minister Narendra Modi-led party's surprisingly lackluster showing at the June 4 election — dissipated.
The equity market developments further support India bulls' view that the country's economic fundamentals and sound corporate earnings would withstand political spillovers from the election.
The resumption in purchases by foreigners has combined with strong domestic flows that further boosted the market. The benchmark NSE Nifty 50 index closed at a new all-time high last week, as investors cheered the Modi government's commitment to policy continuity in one of the world's fastest-growing economies.
“India is one of the few large markets that offer visible growth at a good pace over the next few years mostly unaffected by global developments,” said Deepak Jasani, head of retail research at HDFC Securities in Mumbai. The potential start of the central bank's rate easing can make local shares even more attractive for foreigners and bring bigger inflows, he added.
The allure of Indian stocks has also been boosted by an uneven economic recovery in China and growing concern over likely geopolitical risks from elections in Europe and the US.
As foreigners return, local institutional investors, which include mutual funds and insurance companies, have continued to plow fresh funds, adding $28 billion this year. That compares with $1.5 billion net inflows from global funds, owing much of its return to positive territory to their buying in June.
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