FII flows keep the market afire

Our Capital Market Burea
16 December 2004

Mumbai: The sensex and the Nifty have created new first ever records as foreign institutional investors keep pumping in never-before sums of money in equities.

The sensex reached 6423.27 today, notching up 76.76 points to close at 6402.29, a gain of 1.21 per cent. This is the first time the index has breached the 6,400-level and shows all signs of continuing to move up further.

The Nifty, after having closed above 2000 for the first time on Tuesday, continued moving up further to close at 2,028.70 level during Wednesday's trade.

Buying was concentrated on blue chips, a strong indicator of FII buying pattern. FIIs are net investors to the tune of Rs4,291.8 crore in the first fortnight of this month.

According to Andrew Holland, executive vice president, DSP Merrill Lynch, "The current momentum in the market is all about funds flow. Foreign investors have become more and more comfortable with the Indian markets, especially post the decision of CalPERS to invest in India." A slow down may take place during the Christmas and New Year week, when FIIs traditionally take a break.

Interestingly, mutual funds have not been able to support the current rally as they are facing severe redemption pressure with investors booking profits while the market is high.

FII money is being routed into emerging markets because of the weakening of the dollar in the currency market. Within the emerging markets' basket, India is one of the more attractive options because of the robust growth of the economy over the last several quarters.