Sharp spurt in FII inflows

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Virendra Verma

Mumbai, Feb. 1

THE foreign institutional investor (FII) inflows have again spurted in the last three trading sessions.

The official figures released by the Securities and Exchange Board of India (SEBI) on FIIs transactions show huge net investment both in the cash and derivatives market.

The year 2005 has also seen a large number of FIIs registrations.

In the last three trading sessions, FIIs have made net inflows of Rs 1726.10 crore in the cash market and in the derivatives segment (index futures and stock futures) their net investment is Rs 941.57 crore. In addition, there is a minor investment in index and stock options.

The huge inflows from FIIs have already resulted in sharp uptrend in the stock price with BSE Sensex gaining around 400 points in just three trading sessions.

Since the beginning of 2005, the flow of funds from FIIs had slowed down with net outflows till January 25. However, there has been spurt in inflows in the last three sessions. The equity investment by FIIs, which saw net outflow of Rs 373.70 crore till January 25, has turned into net inflow of Rs 1352.20 crore till January 31.

Brokers and analysts attributed this to various factors. One, they said that several new FIIs have come to India and they have been aggressive buyers. The FIIs registration has also gone up from 637 at the end of December 2004 to 655 till today.

Another reason for the inflows is that FIIs make their investment decision only in the second and third week of January after they have been allocated funds to various designated markets. "Since the foreign funds managers have been allocated funds for India, they have again turned aggressive buyers," said a top official of a leading foreign broking firm.

For other FIIs, the much-needed technical correction was over in the first three weeks of January and the stock prices had again turned attractive.

(This article was published in the Business Line print edition dated February 2, 2005)
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