It has been pouring across the country; pouring money as well. In June, all of us were wondering whether the large initial public offering calendar would leave anything for the secondary market to run on. The facts would have surprised many. The first 20 days of July saw nearly $4 billion coming into India. Of that, around $1 billion would have gone into the DLF and the ICICI Bank issues. The rest has been chasing stocks in the secondary market. Are you surprised that Reliance Industries is at Rs 1,900 and DLF at Rs 650?
July is headed to be a $5 billion month. I do not remember when a single month last saw such large inflows. Just to put it in perspective, foreign portfolio investment for the whole of 2007 have now touched $9.5 billion. Not bad, you would say, halfway into the year, considering that total inflows in 2006 were only $8 billion.
Of course, part of this may be a correction of the underweight stance that many foreign funds took on India in the first half, a period in which India under-performed most global markets. The bigger reason could be a whole lot of new money getting into emerging markets. Why, Taiwan has received $2.2 billion dollars already in July and Thailand $1 billion. The sun is not shining on India alone.
Interestingly, domestic funds have not got in anything in July. So far, mutual funds have sold Rs 1,200 crore and local institutional investors Rs 1,500 crore. It is a bit perplexing as there should be cash left to invest; maybe the new highs have invited some profit booking. There is no let-up in the trading commitment though.
The July derivatives series has now swelled to Rs 90,000 crore, or $22 billion. That is staggering. Stock futures alone account for $11 billion of positions. It is truly a heady cocktail of delivery-based buying being topped up with some serious speculative bets. The thing about money is it looks stunning when it keeps rushing in. Gets a bit ugly though when it starts going back. It is a blade with two sides.
(The writer is Executive Editor, CNBC-TV 18)