FPIs ignore 'sell in May & go away' adage, buy Rs 43,800 crore worth in May; here're some stocks to pick

'Sell in May & go away' remained an ignored old adage as overseas investors, the FPIs, remained net buyers of Indian equities and poured in more than Rs 48,800 crore in the Indian stock markets. It means FPIs shopped for a little more than Rs 2,300 crore a day at Dalal Street on average for the 19 trading sessions of the month.

BSE Sensex gained more than 1,500 points, or about 2.5 per cent during the month of May, while NSE's Nifty50 advanced about 470 points, or 2.6 per cent, during the previous month.

The return of FII's pepped up domestic investors in search of Alpha in a month that defied the usual ' Sell in May and go away' rhetoric. As markets shrugged away inflation, supply-chain disruptions and a slowdown in certain discretionary spends, buoyant FII inflows of Rs 43,800 crore, said S Ranganathan, Head of Research at LKP securities.

According to the data from NSDL, the total assets under custody (AUC) of FIIs increased about 1.28 lakh crore between May 1-15 to Rs 47.98 lakh crore on May 15, which was Rs 46.70 lakh crore on April 30.

The Financial Services sector topped among the sectors with its AUC rising Rs44,297 crore, followed by the Auto and Auto Ancillary sector whose AUC jumped Rs 22,300 crore during the period. The FMCG sector saw an inflow of Rs 15,856 crore, while the Oil & Gas sector attracted Rs 10,668 crore during the first fortnight of May 2023.

Among other sectors, Consumer Durables, Capital Goods, Information Technology and Healthcare witnessed an inflow of Rs 5,800-8,500 crore during the given period. The latest data for the second half of May is not available with NSDL so far and will be updated later.

According to the market analysts, select factors including robust domestic macroeconomic data, cooled down US dollar, upbeat Q4 earnings by India Inc, fall in crude oil price, and robust GST collections attracted global inflows in the Indian equities.

"GST collections, PMI data and credit growth suggest a resilient economy which can deliver 6 per cent GDP growth and mid-teen earnings growth in FY 24. The GST collections stood at a record Rs 1.87 lakh crore in April 2023. In this favourable macro setting, FPI flows are likely to continue supporting the market," VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

India's gross GST revenue collection in the month of May stood at Rs 1,57,090 crore, registering a rise of 12 per cent on a year-on-year basis, the Ministry of Finance said on Thursday.

Global markets were gripped with the usual melodrama surrounding the breach of the US Debt ceiling and the extension of the same. Like every time, just before the US government’s debt default deadline, President Joe Biden and Republican House Speaker Kevin McCarthy agreed on a deal that can potentially avert the crisis, said Ashika Research in its monthly note.

"While the IMF remains gung-ho on India’s growth prospects and even considers it as one of the brightest spots in the world, a slowing global economy means that growth in the volume of world trade is expected to decline from 5.1 per cent in 2022 to 2.4 per cent in 2023, hurting exports," it said.

The International Monetary Fund (IMF) recently slashed its global growth forecast for 2023 and 2024 by 10 basis points each- to 2.8 per cent and 3 per cent, respectively. However,  India's GDP for the January-March 2023 quarter accelerated to 6.1 per cent and 7.2 per cent in the entire FY23, as per the data by the Ministry of Statistics and Programme Implementation.

Recently, global brokerage firm Jefferies said that India’s structural story is still intact and that it will only be a matter of time before the BSE Sensex reaches the 1,00,000 mark. The target, Jefferies said, assumes 15 per cent EPS growth on a five-year view and that a five-year average one-year forward PE multiple of 19.8 times is maintained.

The outlook is certainly a more optimistic one for FY24 than what was for FY23, with a majority of negatives now done with and commodity prices normalizing. Albeit, commodities are higher than pre-covid levels, and statistically on a YoY basis, inflation at retail levels in India is running below 5 per cent while there is deflation at WPI levels, said Ashika Research added in its note.

According to Axis Securities, the market is factoring in one more rate hike before the RBI takes a pause and any change in the tone may alter the market sentiment materially. It sees the direction of the bond yields and the dollar index, the direction of inflation as well as growth in the developed world, and the trend in commodity prices as the key triggers in the near term.

On the domestic front, the market would watch out for the direction of inflation and oil prices along with the progress of the monsoon, it added with revising the December 2023 Nifty target at 20,200 by valuing it at 20 times on December 24 earnings, implying an upside of 9-10 per cent from the current levels.

Keeping this in view, the current setup is a ‘Buy on Dips’ market. We recommend investors maintain good liquidity to use such dips in a phased manner and build a position in high-quality companies with an investment horizon of 12-18 months, said Axis Securities.

Ashika has picked HDFC Bank, ICICI Lombard General Insurance Company and Coromandel International with a buy rating. "The companies recommended are fundamentally sound and some are niche businesses with good long-term prospects. We will keep reviewing them from time to time," it added further.

Axis Securities has picked ICICI Bank, Maruti Suzuki, State Bank of India, Varun Beverage and ITC from the largecap space, with an upside of up to 23 per cent in them. From the midcap and smallcap segments, it prefers Dalmia Bharat, Polycab, Federal Bank, Ashok Leyland, Relaxo Footwears, Aarti Drugs, Mahindra CIE, Praj Industries CCL Products, PNC Infra and CreditAccess Grameen with an upside potential up to 37%.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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