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Meet 'TINA', The Driver Of Indian Stock Markets To Record Highs

The National Stock Exchange benchmark index Nifty is up over 22% over this year

The Nifty is back at 10,000 levels, not far from its lifetime time highs of 10,137 hit last month. One of the factors that some analysts say is driving the momentum in markets is TINA, an acronym for “there is no alternative.” In a recent blog post, market analyst Ambareesh Baliga said: “Retail investors seem to be ignoring all the global cues (North Korea tensions) and domestic issues such as high valuation and poor macroeconomic numbers, and continue to pour in funds via mutual funds. This is due to lack of alternative investment options and preference over physical assets such as gold and real estate.”

Many analysts have been voicing concern over the sharp rally witnessed in Indian stock markets this year at a time when earnings growth of corporates continues to remain weak. The GDP growth slowed to a three-year low of 5.7 per cent in the April-June quarter, decelerating from 6.1 per cent in the March quarter. Some analysts have cut their GDP growth forecast for this year. On the other hand, the benchmark for bluechip stocks, Nifty, is up over 22 per cent over this year.

The gains in midcaps and smallcaps have been even sharper. The BSE midcap and smallcap indices have surged 32 per cent and 39 per cent respectively so far this year.

So what is driving the stock market rally in India? Strong inflows from domestic institutional investors, including mutual funds as well as inflows from global institutional investors. Domestic institutional investors (DIIs) have bought stocks worth nearly Rs 70,000 crore so far this year. This strong buying from domestic institutional investors has helped provide a strong support to Nifty. For example, in August, foreign institutional investors (FIIs) sold Indian equities worth nearly Rs 12,000 crore. On the other hand, the domestic institutional investors bought shares worth nearly Rs 18,000 crore, preventing the market from falling sharply.

Mutual funds have been a big driver of domestic fund flows into stock markets. According to mutual funds body AMFI (Association of Mutual Funds in India), investors are putting in nearly Rs 5,000 crore in mutual funds through SIPs (systematic investment plans), an investment scheme offered by mutual funds wherein one could invest a fixed amount in a mutual fund scheme at fixed intervals. This has helped overall funds managed by mutual funds hit the Rs 20 lakh crore mark. Equity mutual funds (MFs) registered a record inflow of Rs 20,362 crore in August on strong participation from retail investors. Some analysts have voiced concern over the high levels of inflows into equity mutual funds at a time when market valuations remain high.

Many analysts remain bullish on the prospects of Indian markets. They expect both economic growth and earnings to recover from the second half of this fiscal year. And GST, which has been launched from July 1, is expected to boost growth in the long-term. The International Monetary Fund (IMF) estimates Indian economy to grow at 7.2 per cent in 2017-18 and 7.7 per cent in 2018-19.