FII inflow: May emerges best month for Dalal Street since February 2021

May emerged the best month for Dalal Street investors in 26 months in terms of foreign institutional inflows. Foreign institutional investors (FIIs) net purchased Indian shares worth Rs 27,856.5 crore for the month, a period in which net sales by domestic institutional investors (DIIs) stood at Rs 3,306.4 crore, according to provisional exchange data. It was also a third straight month of a net foreign fund inflows for the market, following net purchases of Rs 5,711.8 crore in April and Rs 1,997.7 crore in March. 

FIIs have been largely buying Indian shares over the past few weeks, with May 19 being the only exception. The market saw a net outflow of foreign funds on this day, with their net sales at Rs 113.5 crore. Barring May 19, FIIs have been net buyers on the Street since April 26 — their strongest inflow in value terms since December 2020, according to the data.

Rapid buying by FIIs powered a near-one-sided liquidity-driven rally in the Indian equity market in 2021.

Many analysts expect sustained buying by FIIs to continue, taking the market to new heights. 

"Looking at the FII trends, one can very much expect a long-term rally in the market, the kind we saw in 2021, before general elections (2024). That could mean a 12-15 per cent upside in the Nifty50," AK Prabhakar, Head of Research at IDBI Capital Markets, told Zeebiz.com.   

He also expects the Nifty Bank to outperform the market over the next 12 months. 

Here's a look at monthly institutional flows on Dalal Street since the pandemic year:

DIIs halted a five-month monthly buying streak in May

"FIIs have turned aggressive buyers over the last few days. This trend indicates further buying by FIIs which can take Nifty to new record highs," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told Zeebiz.com. 

However, he warned of selling pressure at higher valuations, "particularly from DIIs, who are sitting on good profits from their purchases in January and February when FIIs were sellers," he said. 

Catch latest stock market updates here. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.