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FII inflow may touch record high in month

With more than three months left in the current calendar year, FIIs have invested a net Rs 43,970 crore ($10.47 billion) in Indian equities, reports Vyas Mohan.

business Updated: Sep 24, 2007 23:49 IST
Vyas Mohan

After the equity indices, it is now the foreign institutional investors' (FIIs) turn to topple records. With the US Federal Reserve making funds cheaper and the record-breaking spree of equity indices giving renewed strength to the bull-run, FIIs are revving up for another milestone.

With more than three months left in the current calendar year, FIIs have invested a net Rs 43,970 crore ($10.47 billion) in Indian equities, just Rs 3,211.20 crore short of the record high Rs 47,181.20 crore ($10.7 billion) they clocked in the whole of calendar 2005. And this is at a time when the BSE Sensex and the 50-share Nifty of the National Stock Exchange are at their all-time highs.

While the Sensex closed on Monday at an all-time high of 16,845.83 points (up 1.96 per cent), the Nifty ended at a new peak of 4,932.20 points (up 1.96 per cent).

So, what is driving the FIIs and will they carry on at this pace?

"Cheaper fund availability in the US and a strengthening rupee are attracting FII flows. At current levels, the Indian market looks quite attractive as the second quarter results are expected to be robust. There is no reason why FII flows should slow down. Anything around $ 1 billion a month should be just normal," says Sandeep Shenoy, strategist with Pioneer Intermediaries.

In the current year so far, FII investments have averaged a net Rs 4,885.5 crore a month. At the current pace, FII investments could hit new highs in less than a month from now.

The 50 basis point interest rate cut by the Fed and a 11 per cent appreciation of the rupee from 44.68 to a dollar on March 5, 2007, to a nine-year low of 39.73 on date, have seen FII interest growing in Indian equities. While a lower interest rate in the US means cheaper funds to invest, the appreciation in the rupee spells an equivalent return to overseas investors in dollar terms. Mirroring the trend, the CNX Defty (Nifty in dollar terms) firmed up by 60 per cent from a year-ago level of 2,684.70 points to close on Monday at 4,296.75 points, while the Nifty gained only 38 per cent from 3,552.05 points to 4,932.20 points in the same period.