Foreign funds inflow slackens even as markets gain

February 20th, 2011 - 6:52 pm ICT by IANS  

Sensex Mumbai, Feb 20 (IANS) Foreign funds were aloof during the trading week at Indian equities markets which ended Friday, even as stocks rose significantly for the first time in three weeks.Foreign institutional investors (FIIs) were net buyers of equities to the tune of $12.4 million, according to data available with the Securities and Exchange Board of India (SEBI).

In February, FIIs have bought only a paltry $18.97 million. The figure is however, better if compared with January when the overseas funds sold stocks worth $1.05 billion.

Domestic buyers more than filled the void by FIIs this week with the 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ending the week at 18,211.52 points, up 2.72 percent or 482.91 points from the previous week’s close of 17,728.61 points.

Broader indices too rose handsomely.

2011 has been quite a contrast to the previous year, when FIIs were a major factor in the rally of Indian equities markets, having bought stocks worth $28.83 billion.

This year they have contributed almost equally in the current weakness at the bourses, having sold scrips topping $1 billion in 2011 till Friday.

A combination of factors have led to this withdrawal, with analysts mainly pointing to the increasing hawkish attitude adopted by the Reserve Bank of India prompting FIIs to look for greener pastures in other global markets.

In a bid to tame prices, which has kept annual food inflation hovering around double digits, India’s central bank last month hiked its short-term lending and borrowing rates by 25 basis points and hinted at more monetary tightening in the coming months if inflation did not come down.

An increasingly tight monetary stance could hit corporate earnings, according to leading industry bodies, and bring down growth in key sectors like manufacturing.

Also disturbances in the external environment like political turmoil in the Middle East and North Africa have resulted in quite a bit of nervousness in global markets.

Given this scenario, FIIs are looking to book profits in Indian equities markets, which last year had seen benchmark indices rally more than 17 percent, fuelled to a large extent by the $28.83 billion inflow of overseas money.

This year, however, the equities markets have been highly volatile. The Sensex has already slipped about 10 percent from the closing figure of 20,250.26 points on Dec 31, 2010.

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