Furtherer reposing their faith in the India growth story, overseas fund houses pumped a whopping Rs 16,600 crore ($3.5 billion) into the domestic stock market in June, taking their total investment so far this year to over Rs 47,690 crore ($10.4 billion).
An analysis of the data available with capital markets watchdog SEBI shows that foreign institutional investors (FIIs) were gross buyers of domestic equities worth Rs 60,687 crore, while they sold shares worth Rs 44,070 crore, resulting in a net inflow of Rs 16,617 crore in June.
Significantly, a persistent inflow of overseas money also helped the BSE benchmark Sensex to regain the psychological 18,000-level last month, after struggling to scale the same for 30 long months.
Though the Sensex could not sustain the 18,000 level for long and ended July at 17,841.74, analysts believe that the inflow will continue in the coming months and that benchmark will scale new highs.
Meanwhile, total net investment by overseas investors so far in 2010 stands at Rs 47,694 crore ($10.4 billion).
"FIIs are confident about the emerging markets and India is one of the most favourite destinations for them. In the coming days also, we see a good amount of funds coming in here and that may help the key indices to hit fresh highs," SMC Capitals Equity Head Jagannadham Thunuguntla said.
FIIs play a significant role in the domestic equity markets and their movement (inflow as well as outflow) causes fluctuation in benchmark indices. In June and July alone, FIIs made a net investment of Rs 27,125 crore, Sebi data show.
"India is one of the most profitable markets for FIIs and they will continue to park their money here in the coming days as well," CNI Research Chairman and Managing Director Kishore P Ostwal said.
After pulling out Rs 9,436 crore from the domestic market in May, FIIs came back in hordes in June and remained invested with an exposure of Rs 10,508 crore in that month. In May, the Eurozone turbulence led these funds to snap their three-month long investment streak in the domestic equities and emerged as net sellers of shares worth over Rs 9,400 crore ($2 billion).
FIIs had pumped in a record Rs 83,400 crore in 2009 into the domestic equities, but started exiting in early 2010. In January, they were net sellers worth Rs 500 crore. But from February, the scenario started changing and they were net buyers of Rs 1,216 crore. In April, FIIs were net purchasers of shares worth Rs 9,361 crore, after pumping in a whopping Rs 19,928 crore in March.