Overseas investors pumped in close to Rs 11,000 crore in the Indian stock market in August - highest in six months - amid hopes of government initiatives on policy reforms and easing of monetary policy globally.

Thus, FII investment in the country’s equity market has reached Rs 63,070 crore so far this year, and Rs 24,518 crore in the debt market during the same period.

In August, Foreign Institutional Investors (FIIs) were gross buyers of shares worth Rs 48,136 crore, while they sold equities amounting to Rs 37,332 crore - net inflow of Rs 10,803 crore ($1.94 billion), according to the data available with the market regulator Sebi.

This was the highest net investment by FIIs in stocks since February, when they had infused Rs 25,212 crore. In July, they had pumped in Rs 10,273 crore.

Market experts said that despite slowing economic growth and a high interest rate regime, foreign investors continued to prefer Indian equities on expectations that government would take fresh policy initiatives.

Besides, they said, investors were anticipating monetary policy easing by the US Federal Reserve and the European Central Bank as global economy remains fragile.

Geojit BNP Paribas Research Head Alex Matthews said, “FII inflow continues, as hopes of policy reform announcements are still alive. But if there are no reform announcements, there might be slowdown in inflow or could be a pause as well.”

However, the current political environment may dashed hopes as the monsoon session of Parliament has been stalled many times following the CAG’s report on coal block sanctions.

“The huge FII inflows were driven on anticipation of monetary easing by the US Federal Reserve and the European Central Bank,” Destimoney Securities MD and CEO Sudip Bandhopadhyay said.

Another market analyst Kishor Ostwal of CNI Research Head said, “FIIs have been infusing money into the defensive stocks such as pharma and FMCGs which have led the inflows.”

Apart from equity, FIIs also invested Rs 265 crore in the debt market last month.

Buoyed by strong inflows, the BSE 30-scrip index, Sensex, rose 194 points or 1 per cent last month to settle at 17,429.56 points on Friday.

As on August 31, the number of registered FIIs in the country stood at 1,754 and total number of sub-accounts were 6,333 during the same period.

(This article was published on September 2, 2012)
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