Fii Investments Down As Economy Begins To Drift

Leading FIIs and foreign brokers have warned of a prolonged lull in such investments unless the economic situation improves and some far-reaching announcements are made by the government.

According to latest Securities & Exchange Board of India figures, till last week, the gross purchases by the FIIs had totalled only Rs 540 crore, with gross sales at about Rs 320 crore, leaving a net investment position of only Rs 221 crore.

In August too, the inflows were very low, with net investments totalling a mere Rs 280 crore by the end of the month. The net investments in August at monthly exchange rates totalled $81 million, according to Sebi. In July, the net investment was much higher at $302.4 million.

 

The continuing decline in FII investments has begun worrying many in the marketplace, since the message is increasingly becoming visible that the FIIs are weighing the economic and political factors very carefully.

Leading FIIs and foreign brokers dealing on their behalf agree that there may not be any dramatic improvement in inflows immediately, owing to several factors.

Says the chief executive of a leading foreign brokerage firm: First we waited for the elections and then the budget. Now what do we wait for? The economy is drifting.

FIIs say inflation and interest rates being high and the deficit posing a problem, there is little in the economy which would lead to FIIs coming in with large funds into the market. No new money will come in at this point, an FII warns.

Regulatory officials, however, one reason for the low inflows could be that the FIIs are waiting for the next year to make fresh allocations for India.

The inflows can then pick up by the first or second month of 1997, an official said.

In 1995, the officials say, the trend was just the reverse, with the inflows picking up sharply towards the end of the year. In 1994, the trend was similar to this year