After being fence sitters for nearly three months, overseas investors now seem to be back in action. The total investment by foreign institutional investors (FIIs) in the Indian market in calendar year 2012 is set to touch the $10-billion mark.
The net FII inflow till date in 2012 stands at $9.87 billion (Rs 49,630 crore), compared with a net investment of $2.01 billion (Rs 8,807 crore) in the corresponding period the previous year. The net outflow in the entire calendar year (CY) 2011 had stood at $358 million.
An analysis of the data available with capital market regulator, the Securities and Exchange Board of India (Sebi), shows that FIIs poured in $1.3 billion in the first nine trading days of the current month. During this period, however, the Bombay Stock Exchange benchmark Sensex fell 1.24 per cent.
They were gross buyers of domestic equities worth Rs 3,47,073 crore, while they sold Rs 2,97,723-crore shares, resulting in a net inflow of Rs 49,349 crore ($9.8 billion) as on July 13. FIIs net bought Rs 281-crore ($51-million) shares on Friday, according to the provisional data released by stock exchanges, taking their total net inflow in Indian equity markets to $9.87 billion. This represents a stark turnaround from April, May and June, which had seen outflows of $206 million, $58 million, and $86 million, respectively.
Change of guard
According to market experts, a change of guard at the finance ministry could have prompted foreign investors to re-look at India as an investment destination.
After taking over the additional charge as the finance minister, Prime Minister Manmohan Singh has assuaged investors’ concerns over policy impediments in the way of foreign investments and assured of trimming the fiscal and trade deficits to put the country back on a high growth trajectory.
“If political policymaking gets better and the government is able to kick-start the reform process under new leadership at the finance ministry, the second half of this year could be much better than the first. One could then expect good FII inflows,” says Jagannadham Thunuguntla, strategist & head of research at SMC Global Securities.
“The FIIs have been shying away mainly on concerns over slowing growth, various downgrades by the rating agencies and the currency risk. These factors are playing spoilsport for the FIIs,” says A K Prabhakar, senior vice-president (equity research), Anand Rathi.
Between January and March, the first three months of the current year, overseas investors had made a value buying of a net amount of $8.8 billion (Rs 43,950 crore) on hopes of a rate cut by the Reserve Bank of India, which delivered it with a surprise 50-basis-point cut in April, and cheap valuations.
“FII flows into Indian stocks have been positive lately, but this may not sustain for long unless there is encouraging policy action from the government’s side in the next few days,” says Amar Ambani, head of research, IIFL.