Foreign institutional investors (FIIs) have bought more Indian stocks so far this month than ever before in the last month of the calendar year, right since 1993 when they were first allowed to invest in Indian markets.
Better still, improving risk appetite and lower interest rates spurring growth may keep the money coming for some time yet, say experts.
FIIs registered with the Securities and Exchange Board of India are typically structured like mutual funds, which gather money from a number of investors and allocate it on their behalf. This year, these entities have bought `16,719.7 crore more of Indian equities than they have sold, emerging as net buyers for 27 straight sessions since November 12, buying an average `955.09 crore every session.
This year-end spurt is nearly twice their average of `517 crore during the rest of the year.
In fact, this December’s figure is over 60% higher than the previous high in 2009, when they had poured in `10,233.1 crore.
A Citigroup Global Markets India strategy report dated December 10 cited global liquidity as the second-most important of four reasons for bullishness on India, after government action. Interest rates and earnings upgrades – in that order – were the other two reasons it listed. There is a “bullish buzz about India”, said the report, authored by Aditya Narain, Jitender Tokas and Pooja Kapur. “...market expectations are almost as bright as Christmas lights in malls/streets, and India is on people’s minds.”
Rikesh Parikh, vice-president, markets strategy and equities, Motilal Oswal Securities, said the flows are likely to continue with the markets headed higher in the new year. “There has been a bit of slowdown in flows over the last couple of days on account of year-end holidays, but the trend remains positive. We are positive on the markets as there are no negative triggers on the horizon and with RBI likely to start easing interest rates, markets are all set to test previous highs,” he said.
The Sensex has risen 24.59% so far this year, closing at 19255.09 on Monday.
Anish Damania, head of institutional equities at Emkay Global Financial Services, believes that with too much liquidity around, India seems to be the beneficiary of FIIs pumping money in global allocated portfolios.
Currently, the risk appetite remains quite strong as European market yields have seen a drastic fall and with not too many shocks ahead, equities globally have become an attractive valuation, said Damania. “Though fiscal cliff remains a worry, one needs to wait and watch if there is likely to be any impact of the same on FII flows.”