India's Favorite Destination for FIIs

The best is yet to come for the Indian stock market in terms of inflows from the foreign institutional investors (FIIs) which have done the net transactions of Rs 60,083 Cr in the current fiscal and Rs 75,334 crore in 2013-14, despite the Sensex and Nifty indices being driven to new highs on optimism of a decisive turnaround in the economy. This was informed by ASSOCHAM.

This market fact also authenticates that Foreign Institutional Investors (FIIs) are betting big on India.

With such market development, it should be noted that the equity market in emerging markets has been on a decline with India being an exception. “The focus will now on corporate earnings which will improve the price to earnings ratio of the market," pointed out D S Rawat, Secretary General of ASSOCHAM.

As per the report, FIIs have bought equities worth Rs 6.41 lakh crore while they have sold stocks worth Rs 5.81 crore in FY15 so far. In FY 14,
in the second half of the year, FIIs bought stocks worth Rs 7.70 lakh crore and sold equities worth Rs 6.94 lakh crore.

"It is clear from the data that the net equity inflows from about 1700 odd SEBI-registered FIIs are not the only force driving the equity market at this point of time. There is certainly presence of the domestic institutional investors and mutual funds getting active in the market place, while the retail participation is gradually building up," stated the report.

However, the report also suggested that the FII inflows in FY 15 are not substantial when compared to the inflow in FY 10 and FY 11. "The net inflow in the stocks had exceeded Rs seven lakh crore each in both these years. In 2009-10 and 2010-11, the best years for the equities from the FIIs' points of views, the Sensex was trading at 15,585 annualised average and 18605 respectively. Both these years had witnessed a jump of 26% and 20% respectively," added the report.

Interestingly, one of the findings also revealed that FIIs preferred debt market over equities. "However, going forward, the equities will see more action maybe after two quarters once the corporates are able to clean up their balance sheets of the high debts and some of the investment friendly policy action translates into real consumer demand at the bottom," said Mr Rawat.