Summary*FIIs were net buyers in 2007
*Inflows have surged multifolds since Sep 2007; surge in inflows coincides with the reduction in short-term rates by the Fed
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Foreign Institutional Investors (FIIs) were net buyers in Indian markets in 2007. According to the data published by Securities Exchange Board of India, FIIs have made a net investment (in both Equity and Debt) to the tune of $36.2 billion ($33.1 billion in Equity and $3.1 billion in debt), for the first 11 months ending November 2007. This is substantially higher in comparison to the $8.9 billion invested in 2006.
Though net investments were positive over the past three years, a closer observation at the trend indicates a different picture. During the first 8 months of the current year, only a fourth of the $36.2 billion was invested, while the remaining was invested in the last three months (see chart). FIIs invested in both Equity and Debt markets during this period. Interestingly, this coincides with the reduction of short term interest rates by the Federal Reserve. Since September 2007, Fed has pared interest rates by one percentage point in order to protect the economy from falling into recession. Reduction in interest rate, appears to have induced investors to move money into the Indian markets.
Madhan Gopalan
The author, currently based at Louisville, Kentucky, is a Global Equity Research Manager with Ness, USA. The views expressed in this article are his and not necessarily of his employer. He can be reached at gmadhan72@yahoo.com
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