FII inflows hit record mark in year 2009

The FII investment of Rs 80,500 crore in 2009 is the highest ever inflow in the country in rupee terms in a single year and comes a year after they pulled out over Rs 50,000 crore. FII inflow so far this year has broken the previous high of Rs 71,486 crore parked by foreign fund houses in domestic equities in 2007.

Market analysts believe that the FII inflow in India may continue in the next year as well, if the liquidity conditions remain strong. SMC Capitals Ltd Equity Head Jagannadham Thunuguntla noted “if liquidity conditions remain strong next year, one can expect FII inflows to remain strong into India even in 2010 as well.”

During a year when Sensex added over 70 per cent to its valuation, foreign institutional investors (FIIs) made net investment of over Rs 80,500 crore in the Indian share market.
“However, if dollar-carrytrade-unwinding starts, then one can expect rush of FII outflow from the country, resulting in pressure on Indian markets,” he cautioned.

  Significantly, last year FIIs had pulled out a net Rs 52,900 crore from domestic bourses —a trend triggered with the collapse of global financial services icon Lehman Brothers in the middle of September 2008. This selling trend continued till first two months of passing year.
However, with the sign of revival of economies, the trend turned positive during March and overseas investors started betting big on the domestic bourses. As they came back, even Indian markets staged big rally. Moreover, FIIs don’t have many other choices but for coming and investing in high growth economies of India and China, he added.

The trend of strong FII inflows to the tune of Rs 31,000 crore witnessed during April-June quarter gained further during September quarter this year and the period witnessed an infusion of hefty Rs 34,313 crore. So far in December quarter, foreign fund houses have made a net investment of about Rs 22,000 crore in the stock market, amid a period that witnessed Dubai debt crisis.

Moreover, in debt instruments, FIIs have made net investment of about Rs 5,200 crore so far in 2009, according to Sebi. Interestingly, inflow by FIIs into local stock markets has alarmed the government and other authorities concerned.