The liquidity tide unleashed by successful jumbo public issues of ICICI Bank and DLF has swung the boat of foreign institutional investors (FIIs) decisively towards Indian shores.
In the last 7 sessions, they have invested Rs 6,779 cr or more than a quarter of the total this year
MUMBAI: The liquidity tide unleashed by successful jumbo public issues of ICICI Bank and DLF has swung the boat of foreign institutional investors (FIIs) decisively towards Indian shores.
In July so far, FIIs have pumped in Rs 6,779 crore, or more than a quarter of what they invested in India during the first half of 2007.
During the first six months this year, FII inflows have been Rs 24,278 crore. Of this, nearly one-fourth, or Rs 5,837 crore, was added on June 29 — towards DLF public issue subscription.
Analysts said FIIs have been taking positions in select midcaps ever since they noticed a lull in blue chips, pushing up the CNX Midcap Index 16% this year, outpacing the Nifty, which returned 11%.
This preference is visible in their activity in the futures and options segment, said analyst Utpal Choudhry of IDBI Capital.
“FIIs have been buying stock futures, especially the non-frontline lots, and going short on index futures,” Choudhry said.
On Wednesday, open interest in stock futures touched an all-time high at over Rs 70,000 crore.
Citigroup analysts Tirthankar Pattnaik and Ratnesh Kumar, in a report on July 9, said the worst effects of the factors which caused India’s poor relative performance in the first half of 2007 are already behind, even for the large caps.
“We expect the Reserve Bank of India to take fewer market-dampening actions over the next 6-12 months. Funds have already made a significant return; We are positive on Indian equities over the next 6-12 months,” Pattnaik and Kumar said.
The report also quotes Citi’s in-house technical analyst predicting a Sensex level of 16,206 in the next 3-6 months.
“With the inflation coming under control, market is of the view that interest rates have peaked. Therefore, sentiment has turned positive. Portfolio inflows have risen largely due to this,” said Ajay Pandey, assistant vice president, institutional sales, at Networth Stock Broking.
FII inflows during the first six months were hit largely by the hawkish stand of the RBI, which has been fighting inflation and credit growth since December 2006.
Since then, RBI has hiked the cash reserve ratio by 150 basis points and the repo rate by 75 basis points (since October 2006).
This prompted higher interest rates across the economy, which moderated demand for consumer credit. As a result Indian benchmark indices Nifty and Sensex were among the worst performers anywhere.
Despite hitting historic highs and settling over the 15000 mark this week, the Sensex has given a year to date return of just 9%.
The Shenzen Stock Exchange in the Chinese special economic zone has given the highest returns of 94% globally in 2007.
Among the major indices, Shanghai leads the way with 41% growth. Vietnam and Kospi, the South Korean barometer, have delivered higher returns at 35% and 30%, respectively.
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