Foreign investors drive biggest rally since 2007

Barely a few weeks ago, Indian markets had witnessed one of their worst performances following the outflow of foreign funds and an uncertainty over election results. However, over the past 28 trading sessions, the S&P BSE Sensex has rebounded over 10%, cheering investors.

In fact, the Sensex has witnessed its biggest rally in the past 12 years as foreign institutional investors (FIIs) returned to the Indian debt and equity markets with Rs 48,751-crore investment in March alone, even as domestic investors pulled out. The Sensex has gained over 3,525 points spread over 29 trading sessions from February 19, a rally last seen in 2007, when it had raced from the 15,000-mark to the 19,000-mark in 23 sessions.

The rally is largely due to foreign funds flocking to the Indian markets after indications of a slowdown in western economies. During the last month or so, investors also became richer by Rs 16 lakh crore (12% jump in market capitalisation).

From September 12, 2007, to October 15, 2007, in the span of 23 trading days, the markets had gained 3,553 points — a jump of higher 22.9% as the base was lower back then.

Till now in April, according to the provisional data available with BSE, foreign funds have pumped Rs 401.67 crore into the debt and equity instruments.

On the other hand, in March, DIIs withdrew a net of Rs 13,930.25 crore from Indian markets while, till now in April, they have withdrawn a net of Rs 1,551.34 crore.

Indian markets have played a catch-up with global peers after 4-5 months of underperformance as global liquidity found its way to emerging markets after global central banks turned accommodative and dovish in their monetary policies, analysts said.

“There are clear indications of a slowdown in the western economy. The US Fed has also indicated that it might even go for rate cut in future to boost the economy. That is something which is not good for both debt and equities there. So we are seeing this bull solely because of FIIs flowing into the Indian markets,” said Madan Sabnavis, chief economist, Care Ratings.

The BSE Sensex, which had breached the 39,000-mark on Monday, opened 110.4 points higher at 39,167.05 on Wednesday and touched an intra-day high of 39,266.85. However, towards the later part of the day, the markets witnessed profit-booking by the FIIs, as BSE Sensex closed at 38,877, down 180 points (0.46%).

On the other hand, broader index 50-share NSE Nifty opened at 11,735.30, before touching its intra-day high of 11,761 led by buying interest in bank shares. Nifty closed at 11,644, down 69 points (0.59%).

Despite the flow of foreign funds, the rupee has been on flatter side, trading in the range of 68.5-69.5, as global Brent crude prices have been moving northward, with the crisis in Venezuela deepening.