Foreign institutional investors (FIIs) seem to have brought the verve back to the country’s stock markets. Apparently enthused by the budget last week, they have pumped in as much as Rs 4,307 crore in the first four trading days of March after low-key activity in January and February.
At current exchange rates, that’s just about $64 million short of the $1-billion mark.
According to data from the Securities and Exchange Board of India (SEBI), FII funds saw a net outflow of Rs 500 crore in January 2010 and in February the net investment stood at Rs 1,216 crore.
For the past several years, local speculators, day traders and even investors have taken their cue from FIIs, which continue to hold sway over market behaviour.
The budget for 2010-11 seems to have resurrected their confidence in India. The Bombay Stock Exchange’s 30-share benchmark index, the Sensex has gained as much as 740 points – or 4.5 per cent since February 25,.
The National Stock Exchange’s 50-share Nifty has gained 228 points or 4.7 per cent over the same period.
“The market has not only recovered but has stabilised as well after the budget as it has provided confidence to the investors sitting on the fence,” said Divyesh Shah, CEO, IndiaBulls Securities.
With the country showing a high fiscal deficit and disinvestments by public sector companies and changes in the taxation regime keenly watched, FII fund managers and analysts were keenly awaiting reformist signals in the budget.
“The budget was a big event and foreign investors were looking for some clarity, which came after the budget and hence they are investing the money they were sitting on,” said Vikas Khemani, co-head, institutional equities, Edelweiss Capital. “I think that FIIs will invest more in the Indian market going forward.”
In the whole of 2009 – the calendar year, FIIs put in a net amount of Rs 83,396 crore in the Indian markets.
Market experts expect strong investments this year as well, considering expectations of a higher growth rate in India.
“The momentum will continue and the government’s call on going ahead with the reforms on matters like GST (goods and services tax) have given comfort to the FIIs,” said Shah.