Selling by foreign institutional investors (FIIs) in Indian equities have receded in July so far after they dumped shares worth about Rs10,500 crore in June. Analysts said while the stability in the rupee has come as a relief to these investors, the US Fed Chairman, Ben Bernanke’s comments on Wednesday about the ‘necessity’ of the stimulus programme for the recovery of the US economy is speculated to encourage FIIs to invest in emerging market equities such as India again.
So far, in July, FIIs have been net sellers at Rs 290 crore, but they have been nibbling at stocks in the last coupe of days.
“FIIs have some comfort about the rupee stabilising at levels of Rs 59-60 against the dollar and about the drop in gold imports in June. So, we are not expecting a major sell-off from this point onwards,” said Chokkalingam G, executive director and chief investment officer at Centrum Broking.
Since January of this year, FIIs have pumped in close to Rs 70, 397 crore into the Indian equity market.
FIIs had turned sellers in June due to the sharp decline seen in the rupee levels. With the improvement seen in the US economy, the dollar strengthened causing currencies across the emerging market spectrum to decline in June. The rupee has fallen by more than 10 per cent since June 11 this year.
Improving jobs data and lower inflation in the US were seen as indicators of a recovering US economy leading investors to believe that the QE3 would be phased out sooner than anticipated causing funds to flow away from emerging markets back into developed markets. Emerging economies had been the biggest beneficiary of the QE3, US’ bond-buying programme worth $85 billion.
However, Bernanke’s comments about the need for a more accommodative monetary policy has raised hopes about the continued availability of funds for investment into the emerging economies like India.
Analysts said that the ‘hot’ money coming in through the programme was now flowing away from asset classes such as bonds, commodities and even away from economies like Brazil, Russia and China. India, along with developed economies, are the beneficiaries of these outflows.
“There is growing confidence among investors that the Indian economy would do much better now that the economy and interest rate-cycle seems to be bottoming out,” said Saurabh Mukherjea, CEO – institutional equities at Ambit Capital.
“With the economy and the rate-cycle bottoming out, FIIs now see India as a stable economy. They would continue to buy into Indian equities, in stable high quality Indian stocks,” he added.
Market participants expect FIIs to increase allocation only if the government takes measures to ensure the rupee does not slide further. Any instability in the rupee-levels could further worry investors causing funds to flow out, they said.
For now, funds are unlikely to move out of the Indian equity markets. But the quantum of money that could find its way into the economy would depend largely on government reform actions and the performance of companies in the upcoming results season.
So far, in July, FIIs have been net sellers at Rs 290 crore, but they have been nibbling at stocks in the last coupe of days.
“FIIs have some comfort about the rupee stabilising at levels of Rs 59-60 against the dollar and about the drop in gold imports in June. So, we are not expecting a major sell-off from this point onwards,” said Chokkalingam G, executive director and chief investment officer at Centrum Broking.
Since January of this year, FIIs have pumped in close to Rs 70, 397 crore into the Indian equity market.
FIIs had turned sellers in June due to the sharp decline seen in the rupee levels. With the improvement seen in the US economy, the dollar strengthened causing currencies across the emerging market spectrum to decline in June. The rupee has fallen by more than 10 per cent since June 11 this year.
Improving jobs data and lower inflation in the US were seen as indicators of a recovering US economy leading investors to believe that the QE3 would be phased out sooner than anticipated causing funds to flow away from emerging markets back into developed markets. Emerging economies had been the biggest beneficiary of the QE3, US’ bond-buying programme worth $85 billion.
However, Bernanke’s comments about the need for a more accommodative monetary policy has raised hopes about the continued availability of funds for investment into the emerging economies like India.
Analysts said that the ‘hot’ money coming in through the programme was now flowing away from asset classes such as bonds, commodities and even away from economies like Brazil, Russia and China. India, along with developed economies, are the beneficiaries of these outflows.
“There is growing confidence among investors that the Indian economy would do much better now that the economy and interest rate-cycle seems to be bottoming out,” said Saurabh Mukherjea, CEO – institutional equities at Ambit Capital.
“With the economy and the rate-cycle bottoming out, FIIs now see India as a stable economy. They would continue to buy into Indian equities, in stable high quality Indian stocks,” he added.
Market participants expect FIIs to increase allocation only if the government takes measures to ensure the rupee does not slide further. Any instability in the rupee-levels could further worry investors causing funds to flow out, they said.
For now, funds are unlikely to move out of the Indian equity markets. But the quantum of money that could find its way into the economy would depend largely on government reform actions and the performance of companies in the upcoming results season.
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