New Delhi: Foreign institutional investors (FIIs) infused a record $6.4 billion in October, accounting for nearly one-fourth of the total inflows came in stock market so far this year, reports PTI.
As per the data available with capital market regulator Securities and Exchange Board of India (SEBI), overseas fund houses were net buyers of Indian equities worth $6.42 billion (Rs28,562 crore) during the current month, the highest amount pumped in by the FIIs in any single month.
With this heavy inflow in just one month, the total net investment by FIIs on the local stocks now stands at $24.79 billion (Rs1.12 lakh crore), the highest in a single year.
Market experts said the inflows of overseas funds will not stop here only as they have the opportunity of the better rate of returns in emerging economies like India. This heavy inflow is causing appreciation in the local currency.
"Capital inflows into the country will be higher in the second-half of the fiscal and the rupee will appreciate up to INR 43.44 by end-FY 11 from the current INR 44.60, domestic brokerage Unicon Financial said, quoting a Crisil report.
Crisil expects the country's gross domestic product (GDP) to grow by 8.2% in the current fiscal and continue with the same momentum for the next decade, courtesy the consumption arising out of India's demographics.
However, the heavy inflows in October failed to lift the BSE benchmark Sensex this month. The 30-share index fell 0.2% in October, first monthly drop after May.
The Sensex had gained over 10% in the previous month, a period during which FIIs invested a net $5.42 billion (Rs2,4978 crore). Analysts said the mega Rs15,000 crore IPO by Coal India was a major reason behind the diversion of foreign funds from secondary market to the primary market.
The steady leakage of cash from equity funds has continued in October; debt funds maintain robust asset growth
The alarming outflow of cash from the coffers of equity mutual funds continues unabated. For the fifth straight month since June 2010, equity funds have witnessed cash haemorrhage to the tune of Rs5,727 crore. Meanwhile, debt funds enjoyed net inflows of Rs17,310 crore for October, marking yet another month of growth in assets under management (AUM).
Over the past 12 months now, equity mutual funds have recorded net outflows amounting to a whopping Rs31,500 crore. Only in three months during this period did equity funds record net inflow of cash, which was mostly due to the number of new fund offerings. While investors have parked Rs11,532 crore so far in the month of October, they have withdrawn Rs17,259 crore at the same time, piling on the agony for fund companies.
On the other hand, debt schemes of mutual fund companies are seeing a period of robust growth in assets. Another month of inflows has meant that debt funds have added a phenomenal Rs1,63,200 crore in assets over the last 12 months. This month, investors have parked Rs50,917 crore in debt schemes, while redemptions have touched Rs33,607 crore so far.
Interestingly, this has played out during a period which has seen the stock markets march on smartly to recapture previous highs. Equity funds are normally expected to benefit from such widespread optimism in the markets. However, what has happened is just the opposite. Investors have favoured debt funds over equity funds despite the steady rise in stock prices. To put things in perspective, equity funds have attracted purchases amounting to around Rs1,60,000 crore over the last year compared to debt funds which have witnessed purchases to the tune of nearly Rs7,20,000 crore in the same period. It is pertinent to note, however, that most of this surge in debt fund assets has come from banks and institutions choosing to park excess liquidity in this category. Debt funds have also been aided by the rising interest rate scenario during the past six-eight months.
After the ban on entry load last year, the outflow of money from fund schemes accelerated since most financial advisors could not get incentive to sell and service funds. Yet, industry leaders have been defending the new system publicly by arguing that the system would adjust to paying commissions, sooner than later. Industry leaders have also been trying to explain away the continuous haemorrhage of funds as 'profit-booking'. However, the fact is that whether the market was down or up, investors have been selling.
The Indian market is likely to open on a flat-to-positive note, in sync with its Asian peers which are mostly in the green in early trade this morning. However, Wall Street witnessed a flat ending on Friday ahead of the mid-term elections and the Federal Reserve’s “quantitative easing” announcement later this week. The SGX Nifty is up 45 points at 6,085 against its previous close of 6,040 on Friday.
The domestic market is likely to encounter a bit of choppiness in the holiday-shortened week as the Reserve Bank of India (RBI) is set to announce its quarterly policy review tomorrow. While some experts believe that the central bank might go in for a marginal hike in key rates, others opine that the RBI will maintain a status quo on account of rising prices.
Cautiousness ahead of the RBI quarterly monetary review and the outcome of the US Federal Open Market Committee (FOMC) meeting, weighed on investors worldwide. The Indian market, being no exception to the global nervousness, witnessed a high degree of choppiness throughout the week. The market ended with a loss of 1% for the week ended 29th October with the Sensex losing 133.52 points and the Nifty shedding 48.35 points. On a monthly basis, the market tumbled 2% in October with the Sensex declining 412.70 points and the Nifty falling by 125.70 points.
The US markets ended flat with a mixed bias on Friday as investors awaited the outcome of the US mid-term polls and the FOMC meet. Meanwhile, the Commerce Department reported Friday that the economy expanded at a 2% annual rate in the July-September quarter. The 2% rise marked an improvement from the feeble 1.7% growth in the June quarter.
The Dow added by 4.54 points (0.04%) to 11,118. The S&P 500 fell by 0.52 points (0.04%) to 1,183. The Nasdaq was a tad higher by 0.004 points to 2,507.
Markets in Asia were trading with smart gains this morning on upbeat Chinese manufacturing data brushing aside fears about the outcome of the Bank of Japan and the US central bank’s meeting, scheduled this week. The Chinese Purchasing Managers’ Index rose to 54.7, the Federation of Logistics and Purchasing said. The reading was higher than 53.8 for the previous month and in line with analysts’ forecast.
The Shanghai Composite was up 0.99%, the Hang Seng gained 1.65%, the KLSE Composite rose 0.11%, the Straits Times advanced 1.61%, the Seoul Composite was up 1% and the Taiwan Weighted gained 1.29%. On the other hand, the Nikkei 225 was down 0.18% on earnings concerns and a stronger yen. The SGX Nifty is up 45 points at 6,085 against its previous close of 6,040 on Friday.
The RBI should intervene to arrest the sharp appreciation of rupee, which is hurting the country's exports sector, the Associated Chambers of Commerce and Industry (Assocham) has said.
The sharp appreciation of rupee against other currencies is impacting the exports industry, the chamber said. The rupee is now ruling at above Rs44 against dollar, it added.
However, commerce and industry minister Anand Sharma had recently said, “We do not see that we have reached that stage, where the rupee can be termed as volatile.”