FIIs infuse Rs 20k cr in 43 days

FIIs infuse Rs 20k cr in 43 days
The Times of India, May 20, 2009, Page 25

Bullish On India Growth Story Again, But MFs Pump In Only Rs 3300 Crore

Kumar Shankar Roy TNN

Chennai: Foreigners have been able to spot value better than Indians, at least as far as the stock market goes. FIIs have put in close to Rs 20,000 crore into Indian stock markets in the last 43 days since the bull rally began. Simply put, FIIs were daily net buyers of Rs 500 crore investments per day at a time the benchmark index went up above 14,000 from 8,160 levels. In comparison, mutual funds have been net buyers of Rs 3,300 crore - around 1/7th of the amount committed by FIIs.

According to Sebi data, FIIs have made net investments of Rs 19,820 crore till Tuesday from March 9, (when the 6,000-point rally began). The deluge of funds brought into the country by the FIIs has made them net buyers of equity for the calendar year 2009 at Rs 10,681 crore. They were net sellers of stocks amounting to a whopping Rs 52,987 crore in calendar year 2008.

FIIs are betting on companies reporting an improved financial performance in the years to come on the back of solid government policy initiatives. "We think the ensuing policy action will improve growth and thus earnings. We are forecasting 2.5% and 12.5% growth in earnings for sensex constituents in FY2010 and FY2011 respectively compared to our earlier forecast of minus 10% and 11%," Ridham Desai of Morgan Stanley said.

While many investors are waking up the possibility of Indian economy coming back on track with a smootherthan expected government formation, experts say the bet taken by FIIs for the last 2 months has paid off.

In the last one month, foreign investors have also aggressively taken up stakes in cash-strapped real estate companies such as DLF, Unitech, Indiabulls Real Estate as well as Suzlon either through qualified institutional placements or direct buying on the stock exchanges from the promoters. This has helped FIIs who actively participated in such offerings to immediately sit on significant gains (notional).

Deals like DLF promoters selling off 16.8 crore shares at Rs 230 apiece (current price Rs 385), Indiabulls Real Estate just sold off 15 crore shares at Rs 185 (current price Rs 200) and Unitech sold off 42 crore shares at Rs 38.50 apiece (current price Rs 71) show how foreign investors profited.

A re-rating of the markets is likely to take markets to expensive territory relative to current earnings but an improving fiscal situation would improve the optimism regarding growth next year, Jyotivardhan Jaipuria of Bank of America Merrill Lynch said. However, cautious mutual funds have stuck to debt as their choice of asset during the same period - taking a diametrically opposite view. While FIIs were net sellers of debt to the tune of Rs 3,500 crore from March 9 - fund majors were net buyers having put Rs 46,000 crore into debt during the same time.