FIIs buy almost a billion as sell-off fears recede

Recent currency appreciation may bode well for flows in previous trends are anything to go by

Foreign institutional investors have been bought back around 25% of their total sales over the June-August period in the last eight sessions of trade. 

 

Recent currency appreciation may bode well for flows if previous trends are anything to go by, according to a Deutsche Bank report entitled ‘Fears of FII capitulation receding.’

 

“A rupee depreciation of 13% between Sep and Dec 2011 was followed by a period of FII inflows cumulating US$8bn over the next 3 months. Similarly, INR depreciation of 11% over Mar-June 2012 was followed by FII inflows of US$6bn over next 3 months,” said the report authored by Research Analysts Abhay Laijawala and Abhishek Saraf dated 16 September. 

 

The analysts suggested that while it may be premature to call a reversal, investors would now look to the Fed policy on September 18 and the Reserve Bank of India’s credit policy on September 20th.  The analysts expect a reversal of earlier tightening steps by the RBI. 

 

“In July 2013, RBI effectively increased the cost of money for banks by raising the Marginal Standing Facility (MSF) rate by 200bps from 8.25% to 10.25% and also capped the amount of money that banks could borrow at repo rate (7.25%) at 0.5% of liabilities (from no cap earlier). Both or at least one of steps may be eased/reversed which will bode well for equity markets and banking stocks in particular,” said the duo. 

 

They were net buyers by $912.92 million in the last eight sessions, according to data from the Securities and Exchange Board of India.