After staying away from the Indian stock market in 2011, FIIs have pumped in $387 million (about Rs.1982 crore) in the Indian stock markets last week between 19th March – 22nd March 2012, taking the year-to-date total to a huge $8993 million (Rs.44686 crore), according to data available with Sebi. FIIs infused a net amount of $1828 million in March 2012 only.
The strong gush in inflows has helped improve the equity market as Sensex has gained 12.33% so far this year even after a fall of about 3.25% in January 2012. In fact, the general consensus is that FII inflows are expected to remain positive and bullish even after a complete wash-out event like Union Budget.
Also, inflows through participatory notes have reached to an 8-month high in February. The total value of participatory notes in equities and debt, including derivative instruments, stood at Rs.183151 crore in February, as per the Sebi’s website. In May, 2011, the total value of P-notes in equities and debt, including derivatives, stood at a high of Rs.211199 crore before declining sharply subsequently as the equity market turned bearish and fund flow dried up.
Participatory notes are issued to investors, normally hedge funds, by FIIs which do not take a long-term view on the market. Going ahead, with most of the news out of the way specially Union Budget and anticipation of rate cuts in RBI’s monetary policy in April 2012, investors are turning their focus on the country’s long-term growth projections.
But, there are concerns that FII inflows might reverse if Q4 results are not in line and USD-INR breaches 52 & remains above it. If rupee continues to fall, FIIs may look to square off their bullish positions. So, 1st and 2nd week of April, 2012 when results season will take off along with the RBI monetary policy review will be keenly awaited and analyzed.
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