CHANGING TRENDS

Calcutta, Dec. 26: Foreign institutional investors returned to the domestic market in 2009 with renewed vigour after the mass exit last year.

In the current calendar year till December 24, FIIs made a net investment of Rs 80,235 crore in equities compared with a net pullout of Rs 58,076 crore in 2008.

In rupee terms, the net FII investment in 2009 was 38.15 per cent higher than what they had repatriated in 2008.

The difference is still higher (43.03 per cent) in dollar terms — the domestic currency has appreciated against the greenback by 3.5 per cent from Rs 48.5 a dollar in December 2008 to Rs 46.85 a dollar on December 24 this year.

In rupee terms, the FII investment of more than Rs 80,000 crore was the highest ever in a single year. FIIs made a net investment of Rs 69,631 crore in 2007.

Market analysts believe that the $7-trillion excess liquidity injected into the global system by various governments through stimulus measures and easy monetary policies to bail out their respective economies from the global financial meltdown had helped foreign investors channelise their investments in emerging markets, including India.

Economic recovery is believed to be happening first and faster in India than in the developed economies.

“A weak dollar has also bolstered the flow of the greenback to emerging markets for a better return,” said Nilesh Shah, managing director of Envision Capital Advisors Pvt Ltd.

“The euphoria that we saw in 2009 may not be sustained for long. What attracted the FIIs to India was the country’s growth story. The first half of 2010 would be critical for the Indian economy and probably in the second half of 2010 we might see the euphoria abating,” Shah added.

The tightening of liquidity on a global scale and a rise in interest rates is expected next year. When that happens, a reversal will start in the equity markets, say experts .

Buoyed by FII money, the 30-share sensex on the Bombay Stock Exchange rose 78.59 per cent between January 1 and December 24 this year, the highest among all countries.

The number of foreign institutional investors registered with market regulator Sebi has also increased to 1,704 as on December 24, 2009 from 1,594 on December 31, 2008.