Market continues to remain upbeat as FII flows are gushing towards Indian markets once again. Despite the decent recovery in the last two months, Indian markets have still underperformed the global key markets. Hence, technically, there are ample reasons to believe that the rally has more legs to go.

Indian markets continue to make decent gains after the breather that it took yesterday. Sensex gained 1.01% to close at 34,324.11 while Nifty gained 1.26% to close at 10,155.60. The positive sentiments owes a lot to the liquidity from FIIs, who turned net buyers in May after remaining bearish for three consecutive months. FIIs bought equities worth Rs 13,000 crore in Indian market during May. The month of June has been even better with FIIs buying the same worth of equities in the cash market within 5 days of the month.

With the blessings of FIIs, Nifty has reclaimed the level of 10,000 after hitting the lows of ~7,500 in April. Despite this sharp rebounce, India has still underperformed the other key markets in May'20. Key global markets - Brazil (+9%), Japan (+8%), Russia (+6%), the US (+5%), Korea (+4%), the UK (+3%), Indonesia (+1%), MSCI EM (+1%) closed higher in local currency terms. The Nifty, however, was down 3% MoM. Over the last 12 months, MSCI EM (-7%) outperformed MSCI India (-17%). Notably, over the last 10 years, MSCI India has outperformed MSCI EM by 63%.

Consumers are not too hopeful:

Q1FY21 is expected to be a complete wash out quarter and recovery is expected to be gradual, at best from June onwards.This is expected to wipe out FY21E earning growth as demand continues to remain impacted. The negative sentiments are rightfully captured by the RBI’s consumer survey in May 2020.

Current situation Index (CSI) fell to a record low of 63.7 in May, which is the worst in the survey’s history. Consumer perception on the general economic situation, employment scenario and household income has turned extremely pessimistic, according to the RBI’s consumer survey. Most of the consumers have put a sharp cut in discretionary spending which is not going to improve for the rest of the year.

Key takeaways:

While the government is banking on monsoon to revive the sentiments, it did little in terms of direct support in its stimulus package of Rs 20 Tn. The worst part is, 47.4% of the participants expect their job prospects to worsen in next one year while over 80% believe that their income will go down in next one year.

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