Net investments by foreign institutional investors in Indian equities have crossed the Rs 25,000-crore mark so far in calendar 2012, according to data from the Securities and Exchange Board of India.
On Tuesday, FIIs were net buyers of equity for Rs 1,400 crore.
“The foreign inflows are similar to what one saw in the three months of March, April and May of 2009. The pattern is similar because it is the same liquidity driving the market. The foreign inflows have improved because the risk appetite has also improved globally. The currency (rupee) appreciation has also helped increase the investment,” said Mr Pankaj Pandey, Head of Research, ICICI Securities. “This rally may sustain for sometime but FII inflows have key potential to bring the market back to decent levels,” he said. The rupee has appreciated to Rs 49.30 on Tuesday from Rs 53.30 on January 2, according to the Clearing Corporation of India.
According to a UBS India Market Strategy report, FII ownership in Indian stocks — if BSE500 is taken as a proxy for the overall market — increased slightly from 15 per cent in the September 2011 quarter to 15.2 per cent in the December 2011 quarter. Market experts believe that it is foreign money that is dominating the stock market and pushing the rally. “Not surprisingly, it is foreign money that is dominating the market. Flows this time are second only to 2007, and meaningfully more than the 2003 and 2009 equity rallies. What is however different this time is that domestic flows have actually been negative – over 50 per cent of foreign inflows,” said an India Strategy report by Citi.
“In December, we had not expected such high foreign inflows. We had expected some inflows but not such a sharp rise. There has been some improvement in the market over the last fifteen days because of positives in the domestic market. This can be one reason for high inflows,” said Mr Dipen Shah, V-P, Kotak Securities.
If sector-wise ownership is to be looked at, the December 2011 quarter recorded some increase in FII ownership of cement and telecom companies and a decline in FII ownership of metals and mining and real estate companies, among BSE500 stocks, said the report by UBS.