• FEBRUARY 22, 2000

FII investments continue to surge

The high valuations in the markets are definitely giving the Indian investors jitters, but foreign institutional investors (FII) seem to be enjoying every bit of it. One just has to take a look at their net investments during the current month.

What is driving this euphoria in buying interest? Software stocks? Media stocks? Pharmaceutical stocks? Indeed there has been large scale buying interest in stocks in these select sectors but it is difficult, not to mention hazardous, to guesstimate the precise parking place of these funds.

Let's consider some facts. The FIIs have invested (net) Rs 19.6 bn during the month to date. That's an average of Rs 1.3 bn per day. The aggregate investment (net) of FIIs in India, in debt and equity, now stands at Rs 378.8 bn.

What these figures fail to reflect however is that FIIs have been aggressively churning their portfolios. In February alone the FII have already made gross purchases of Rs 66.5 bn and effected sales to the tune of Rs 46.9 bn. This surely reflects that FIIs have been aggressively shifting positions and in the process booking profits.

The current interest in the domestic markets has been spurred by the government's recent measures to push forward the second phase of economic reforms. The economic recovery has also contributed in significant measure to this surge in FII inflows. Whether the buying interest will continue unabated, as witnessed so far, will depend, at least partially, on the government's new policy measures. In this regard, the Union Budget will be keenly awaited.

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