New Delhi: Foreign Institutional Investors inflows have increased by 1635 per cent or a 17-time increase during 2003-04, the Economic Survey said on Wednesday.

Net FII inflows, both debt and equity, rose to Rs 48,968 crore in the last fiscal from a meagre Rs 2822 crore in 2002-03, the pre-budget economic survey said.

Net FII investments are shaped by expectations from Indian equity and the Indian rupee, as also strong global investment flows into "emerging markets" which saw offshore primary market issuance going up from Rs 910 crore in 2002-03 to Rs 3,746 crore in 2003-04.

The survey, however, pointed out "these expectations changed in May this year, and the largest ever one-month exit (of Rs 3507 crore), by foreign investors took place".

The survey also highlighted the role of mutual fund industry in the overall growth of stock market. Overall assets under management (AUM) grew from Rs 102,831 crore to Rs 143,688 crore in 2004, it added.

As far as the market size is concerned, the equity market capitalisation grew by nearly 90 per cent to Rs 13.77 trillion in March 2004, up from Rs 7.25 trillion in March 2003.

"This value was roughly of the same size as bank deposits suggesting that in 2003-04, the equity market was as big as the banking system in terms of financial intermediation," the survey said.

In terms of US dollar, the equity market capitalisation worked out to 310 billion dollar making India one of the bigger equity markets in the developing world.

With regard to increased level of volatility in the Indian stock markets, the survey pointed out that Indian equities have co-movement with equity markets outside the country.

Equity volatility has been low in the recent period, when compared with India's longer experience, it said adding 2003-04 was a more volatile year than 2002-03 on both equity and currency markets.

"India's deepening globalisation is leading to higher correlations between Indian equity indexes and world markets," the survey said adding these correlations, however, are as yet small, and there were considerable gains from diversification for global portfolios that harness Indian equity indexes."