Easing US-Russia tensions, S&P rating booster for India to influence FII sentiments

Mumbai, Aug 16 The latest development around easing of tensions between the US and Russia indicates that the secondary tariff of 25 per cent imposed on India is unlikely to come into effect after August 27, analysts said on Saturday, adding that this would boost FII sentiments.

Another positive factor to influence foreign investors is S&P Global raising India’s credit rating from BBB- to BBB.

Going forward, the FII activity will be influenced by the action on the tariff front, said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

The analyst noted that despite the massive buying by domestic institutions, the Indian market has been underperforming for the past 6 weeks amid trade-related concerns and FIIs' outflows.

"India has been underperforming most markets during the last six weeks. This underperformance is despite the massive DII buying aided by robust inflows into mutual funds," Vijaykumar said.

FIIs have sold equity for Rs 24,190 crore through the exchanges till August 14; however, this selling has been completely eclipsed by the massive DII buying of Rs 55,790 crore, he added.

The tepid earnings growth, elevated valuations and modest projection of 8 to 10 per cent earnings growth for FY26 have emboldened the bears to increase short positions, impacting the market.

According to analysts, sustained FII selling in IT stocks has pulled the IT index down. However, banking and financials continue to be relatively resilient due to fair valuations and institutional buying.

Meanwhile, Indian equities snapped a six-week losing streak and ended nearly a per cent higher in the holiday-shortened week.

Despite a positive start, momentum slowed in later sessions due to conflicting signals. In the end, benchmark indices rose, with the Sensex closing at 80,597.66 and the Nifty at 24,631.30.

"The rebound was supported by a favourable macroeconomic backdrop. Retail inflation eased to 1.55 pc in July -- the lowest since June 2017 -- driven by a sustained fall in food prices," said Ajit Mishra, SVP, Research, Religare Broking Ltd.

Wholesale inflation also stayed in negative territory at –0.58 per cent for the second straight month, reinforcing the view of contained prices.

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