It’s raining dollars in the Indian stock market with the overseas investment on local bourses crossing the $3-billion mark since the beginning of this year.
Foreign institutional investors (FIIs) have put in a net of $3.05 billion (Rs 12,300 crore) in Indian stocks so far in 2007, while taking their total net investment in the country so far to over $52 billion.
But the net FII inflows in the first four months of 2007 is over a billion dollars, less than the figure invested in the same period of the previous year. More than half the net investment by FIIs this year came in April, after overseas investors returned to the bourses with positive sentiments as the bellwether Sensex on the Bombay Stock Exchange regained its once-lost 14,000-point level.
The bourses had witnessed a herd-like flight of FIIs after a sharp fall in February, but with corporate earnings meeting or beating expectations, the sentiment has improved considerably, said a broker.
According to data available with the Securities and Exhange Board of India, FIIs purchased stocks worth about Rs46,400 crore and sold stocks worth about Rs9,500 crore in April 2007, taking their net investment to about Rs6,900 crore.
However, the net FII investment for January-April period is estimated to remain around three-billion dollar level, as against about 3.3 billion dollars in the same period of 2006, said another broker.
FIIs had purchased stocks worth a net of about eight billion dollars in entire 2006, as against a record high of 10.7 billion dollars in 2005.
A sharp plunge of about 30 per cent in the May-June period and another major fall in December were the major drivers for the decline in FII inflows last year.
However, if the prevailing positive trend continues on the FII front, the total overseas investment on the domestic bourses could rise to as high as 12 billion dollars, while beating the record set in 2005, the broker added.
Besides, the depreciating dollar against the Indian rupee could also propel the net FII inflows in terms of the US currency.
A lot would depend on how the market reacts to further corporate earnings results going forward, the analysts believe. If the benchmark Sensex manages to regain the 14,000 level decisively by keeping above this mark for a couple of weeks, the sentiments could get a significant boost and herald a prolonged uptrend on the bourses.
Last week, the Sensex plunged by more than 320 points on Friday while ending a five-day upward rally primarily driven by strong corporate results.