The Hindu Business Line : FIIs inject $1 b in a week; inflows cross $8 billion

FOREIGN institutional investors (FIIs) continued to repose faith in India's capital market with their net investment crossing $1 billion in just a week's time. Net inflows crossed $8 billion (until December 3, 2004) this year, the highest in a single year since 1993 when they were allowed to invest.

According to data released by SEBI, the FIIs' combined investment in equity and debt last week (November 29-December 3) touched $1.339 billion. Out of the total inflows, $689 million was invested in equities and $650 million was invested in the debt market. The net investment by FIIs in 2004 touched $8.194 billion, out of which $7.63 billion went into equity markets and $563 million into the debt market.

Inflows into the debt market moved up considerably last week and this is mainly due to FIIs' investment limit on the debt market being raised to $1.75 billion from $1 billion. Active purchases by FIIs in the equity market drove stock indices to their all-time high levels on Friday. Stock indices once again touched a new high during Monday's trading but they closed marginally lower than Friday. The debt market also witnessed a fall in the yields of most securities due to FII buying.

Brokers said most of the FIIs are bullish on India and this is due to strong fundamentals of the economy. "Several FIIs investing in India are sitting on cash and they are deploying it now. This is done, as they feel that more funds would be allocated to them next year," said a top official of a foreign broking firm.

He said the appreciation of rupee against the dollar is also attracting FIIs' money. "Even without deploying funds in any market, a strong rupee against the US dollar would benefit most of the FIIs," he added.

Brokers dealing with FIIs said more inflows are expected in India by the middle of December. "After this round, there would be huge inflows in the new year," said a broker.

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