By Venkatachari Jagannathan Chennai, June 18 : The stock markets have been inching up since March 2023. Nifty has risen 7.7 per cent in this period, while the BSE Smallcap index has risen 18.9 per cent and the BSE Midcap index has risen 16.9 per cent, said Dhiraj Relli, Managing Director and Chief Executive Officer, HDFC Securities. The upward trajectory is owing to a combination of factors such as good FY23Q4 corporate results, foreign institutional investors (FIIs), and also due to the domestic investor interest. "However, the markets may start getting nervous ahead of the next round of state elections due in November/December," he told IANS in an interview. Excerpts: IANS: What is driving the Indian stock markets upwards in your view? Relli: FY23Q4 results across the broad markets were encouraging, thus pulling in investor interest in these segments. Foreign Portfolio Investment (FPI) flows have also been robust in this period, pumping in a net $8.3 billion in Indian equities in these three months (from April 2023 onwards) targeted mainly at large caps. Indian macros have also improved steadily and the country remains a bright spot in the emerging market landscape despite not so cheap valuations. Local investors, who were sitting on the fence for valuations to correct, have started to nudge in gradually fearing missing out on the opportunity. IANS: How far is the return of the FIIs a major factor? FIIs are only fair weather friends... Relli: FPIs invest across markets based on a number of factors. The key determinant is the amount of funds that they have been able to raise from their investors, which in turn would depend on global risk appetite and the state and trajectory of interest rates. After having raised funds, they would scan the markets in which they are mandated to invest and compare growth rates and valuations. They would then decide about deploying funds in different markets based on their perception about how these two factors stand up. Similarly, pulling out of funds will essentially depend on redemption requests from investors (which may depend on change in risk appetite or desire to shift money into other asset classes) and perception changes of fund managers on particular markets in terms of their valuation excesses, macro or geopolitical developments etc. FIIs make money for their investors and have no love or hate towards any particular country. IANS: How long will this party continue? What are the chances of the party coming to an end? And by what time frame? Relli: Upward movement in our markets could continue as long as the global risk appetite remains high, interest rates do not rise majorly from here, and domestic macros do not deteriorate in the face of the El Nino pattern developing or other factors. The markets, however, may start getting nervous ahead of the next round of state elections due in November/December. IANS: What is your take on the macroeconomic numbers and their impact on the stock market? Relli: We have witnessed a series of encouraging macro numbers in India this month. Manufacturing Purchasing Managers Index (PMI), Services PMI, Index of Industrial Production (IIP), automobile sales numbers have been good, indicating revival in domestic economic activity. High Goods and Services Tax (GST) collections, low retail and wholesale inflation indicate lower pressure on the RBI and on government's fiscal situation. These numbers have been well-received by the stock markets as the government may continue with its reforms process without facing undue revenue or inflation pressure, while at the micro level, companies could continue to report healthy financials. IANS: Which are the sectors that are now driving the market and why? And the laggards? Relli: The upmove over the past three months has been led by consumer-led stocks -- whether it is automobiles, consumer durables, reality, fast moving consumer goods (FMCG), healthcare or even banks. This reflects the growing deliverance/expectations from the domestic economy where capital goods, power and public sector units -- the other outperformers also join in. On the other hand, sectors depending to a large extent on global factors/demand like metals, oil and gas and information technology (IT) have underperformed. This situation could continue for some more time going forward. (Venkatachari Jagannathan can be reached at v.jagannathan@ians.in) /IANS