FII inflows in stock market cross Rs1 trillion

New Delhi: Foreign investment in the Indian stock market crossed the magic Rs1 trillion mark ($22 billion) for the first time in history and analysts have predicted the overseas inflows will continue to increase in the coming months, reports PTI.

As per data available with market regulator Securities and Exchange Board of India (SEBI), foreign institutional investors (FIIs) have made net purchases of domestic equities worth Rs1,00,574.20 crore till date this year.

Going by the pace of foreign fund inflows, analysts are bullish about continuation of the trend in the near term, given that the country is one of the hottest destinations for investment by overseas fund houses.

FII investment of Rs1,00,574.20 crore so far this year is the maximum garnered by the domestic market in a single year.

Last year, FIIs were net purchasers of shares worth Rs83,423 crore. During the same year, the stock market benchmark Sensex had recorded a gain of over 80%.

FII inflows are primarily responsible for the surge in the domestic equity market. FIIs have been pumping funds into emerging markets like India on account of their strong growth prospects and fundamentally sound companies.

Indian bourses picked up significant momentum during the second quarter of current fiscal, driven by FII inflows. This helped the stock market breaking out of the tight range it was confined to in the previous three quarters.

Analysts believe the government's plans to disinvest in public sector companies, including state-run Coal India Ltd (CIL), will give more investment opportunities to FIIs.

"India is well on the path of reverting to its high-growth orbit in the current uncertain global environment.

Thus, India would continue to attract global fund inflows, driven by its resilient domestic economy," brokerage firm Angel Broking said in a note.

In its biggest one-day gain in five months, the stock market benchmark Sensex on Wednesday zoomed by a whopping 484 points to a 33-month high of 20,687 on record inflows from foreign funds and a firm overseas trend.

The Bombay Stock Exchange's 30-share barometer closed the day up by 484.54 points, or 2.4%, at 20,687.88 - its best close since 14January 2008, when the index had ended at 20,728.05.

The National Stock Exchange's 50-share Nifty index also spurted by 2.31% to close at 6,231.50.

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Thursday’s Market Preview: Positive opening likely

The Indian market is likely to witness a positive opening today on supportive global cues. The US markets closed at their best levels in five months on better-than-expected earnings reports and a weak dollar, increasing the appetite for riskier assets. The Asian markets were trading higher on reports that China’s foreign currency reserves rose to a record high last month, renewing hopes of an economic recovery in the region. The SGX Nifty was up 24 points at 6,299 against its previous close of 6,275 on Wednesday.

It was a day of the heavyweights yesterday, surging on buying interest, after a lull seen on Tuesday. Early support came from the global front, indicating that steps taken by various governments are yielding results albeit at a slow pace. The gains were reinforced by the European markets opening firm. The market settled near the highpoint of the day. At close of trade, the Sensex stood at 20,688, a jump of 484.54 points (2.40%). The Nifty ended at 6,234, surging 143 points (2.35%).

Wall Street ended at its best level in five months on better-than-expected earnings reports and a weak dollar, which increased the appetite for riskier assets like stocks and commodities. While companies like Intel and JP Morgan announced positive earnings, the stocks were among the worst performs on the Dow. The day's gains were mostly driven by industrials and materials stocks after China's trade surplus fell to a five-month low for September.

The Dow rose 75.68 points (0.69%) to 11,096. The S&P 500 gained 8.33 points (0.71%) to 1,178. The Nasdaq added 23.31 points (0.96%) to 2,441.

Markets in Asia were trading higher on reports that China’s foreign currency reserves rose to a record high last month, renewing hopes of a recovery in the region. Earnings reports of US companies like Intel and JP Morgan also added to the gains. In a surprise move, the Monetary Authority of Singapore, decided to increase the ‘slope of the trading band’ of the Singapore dollar against a basket of currencies.

The Shanghai Composite was up 1.27%, Hang Seng was up 1.15%, Jakarta Composite was up 0.63%, KLSE Composite was up 0.30%, Nikkei 225 was up 1.82%, Straits Times was up 0.41, Seoul Composite was up 0.88% and
Taiwan Weighted gained 1.52%. The SGX Nifty was up 24 points at 6,299 against its previous close of 6,275 on Wednesday.

Industry body the Associated Chambers of Commerce and Industry (Assocham) on Wednesday said the Reserve Bank of India (RBI) should reduce the cash reserve ratio (CRR) — the portion of deposits banks have to park with the apex bank — and statutory liquidity ratio to help increase the cash base available to banks for lending.

In a note to the RBI, the chamber said that reducing CRR and statutory liquidity ratio (SLR), the portion of deposits that banks are required to invest in government securities, would facilitate the economy to enter the double-digit growth orbit

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FDI inflows down by 60% in August

New Delhi: Reflecting the fragile recovery in the world's major economies, foreign direct investment (FDI) into India dipped for the third consecutive month, by about 60% to $1.33 billion in August. The FDI inflows in August last year were $3.26 billion, reports PTI.

In contrast to the smart recovery in the domestic economy and a rebound in exports, overseas investment has shown a slackening trend in the current fiscal year, an official said. In the April-August 2010 period, FDI inflows declined by 35% to $8.92 billion compared to $13.8 billion in the corresponding period last year, the official said.

According to experts, the weak global economic recovery is one of the reasons for declining FDI in India.

"The main reason for the decline in FDI is the slump in the major western economies like the United States and Europe...," said Rakesh Mohan Joshi, international trade expert with India's prestigious Indian Institute of Foreign Trade (IIFT). 

 Crisil chief economist DK Joshi said, "This is not good news for the Indian economy. This reflects that the global economic recovery is still fragile and some impact of that would be reflected in our FDI."

Foreign investment in July 2010 was at $1.78 billion, a dip of 49 per cent from the period a year ago, and in June FDI inflows were at $1.38 billion, a dip of 46 per cent over the year-ago period.

The sectors which attracted foreign investment were services, telecommunications, construction and computer software and hardware, the official said. Maximum investment came from countries like Mauritius, the United States, the United Kingdom, Singapore, the Netherlands and Japan.

The government has recently floated discussion papers on liberalisation of FDI in multi-brand retail and the defence sector.

A recent UNCTAD survey had suggested that India would be the second most important FDI destination for transnational corporations in 2010-2012, next only to China. In its latest World Investment Prospects Survey 2010-2012, the United Nations Conference on Trade and Development (UNCTAD) said transnational corporations are buoyant about investment prospects in China, India and Brazil. In 2009-10, FDI was at $25.88 billion, lower by 5% from $27.33 billion in the previous fiscal.

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