The Hindu Business Line : April may not record flurry of FII activity

THE collective sigh of relief about positive FII inflows in March may have been a case of `speaking too soon', if indications about future inflows are anything to go by.

Foreign institutional investors say the funds flow situation in April may not follow the trend set in March.

Emerging markets such as Korea and Taiwan witnessed negative FII inflows in March, and the fact that India managed to get positive inflows was seen as an endorsement of the resilience of our markets.

However, sources say the sponsored ADRs (American depository receipts) of the banks were the reason India managed positive inflows in March and this lead may not be sustained in April.

"We may see a reversal of FII inflows in April. Expectations are that there may be a temporary bounce in the dollar, with the prospect of a raise in rates after the FOMC (Federal Open Markets Committee) meeting on May 1," said Mr Amitabh Chakraborty, Vice-President and Head Research, Kotak Securities.

The trend has in fact started. In the first fortnight of the month, FII inflows were a paltry Rs 972.8 crore.

Compare this to the Rs 8,592.9 crore that moved into the country in the first two weeks of March. With the equity markets in a slump, analysts do not foresee a flurry of FII activity.

"There are several factors affecting FII sentiment now. There are concerns about demand for commodities falling in China.

"The earning season in the US has not started off so well and the call on oil prices is within a very broad range of $40-$100. The Indian markets played catch-up with global markets on Friday. Some of our clients have been selling," said Mr Andrew Holland, Executive Vice-President, DSP Merrill Lynch.

FII sources say their clients have been offloading some of their exposure to the Indian markets.

"Last year this time, many FIIs and hedge funds were overweight on India. That situation is changing now, a lot of unwinding has already happened," said an FII official.

Investment managers for FIIs are keenly looking at the cues emerging from the US.

"The flattening of the interest rate curve in the US will certainly have an effect on funds committed to emerging markets.

"Indications are that FIIs may choose to invest in their domestic markets under these conditions," said Mr Chakroborty.

The situation about inflows in the emerging markets' debt is even worse. FIIs have been net sellers, selling to the tune of Rs 515 crore in India in the debt segment the last fortnight.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
India, Pak to set up joint business council — Revive commission on economic issues

VAT can drive up your hospital bills!

Profit margins of PSUs on the rise

RINL to raise Rs 2,500 cr to fund expansion — Keen to form jt ventures

Now, insurance sector to outsource data management

April may not record flurry of FII activity

Equities may fall on `risk' notion