Foreign fund inflows, a major decision maker for bourse movement, hold the key for Indian equity markets. As the first half of the calendar 2010 has just been concluded, an FE study finds two significant FII investment patterns that hold a lot of promise for Indian equity markets. Firstly, foreign institutional investors pumped in a record $6.7 billion, the highest ever in the first six months of any calendar year since 1999, as per Bloomberg data. However, it didn?t help prop up the local equity markets? thanks to scattered inflows, with a large part of it making its way into the primary markets.

Also, in the past seven years, FII flows in the second half have always exceeded that of the first half. In all but one of these seven years, Sensex returns have been higher in the second half as against the first half. Could that mean India could receive at least $6.7 billion of net inflows in the remaining six months of this year? If it does, it is good news for the equity market, as it could at least absorb loads of IPOs and FPOs that are in the pipeline.

The Street is quite bullish on the Indian markets, and has come out with a target ranging from 19,000 to 22,000 for the Sensex. The 30-share benchmark index of the BSE is now hovering close to year?s high and within kissing distance of 18,000-mark.

Experts say fund flows in the second half will also be robust unless there is some big macro problem.

?Flows in the second half should be higher than the first half. The first half was marred by a lot of concerns with respect to Europe,? said Sandip Sabharwal, CEO – portfolio management services, Prabhudas Lilladher.

Sabharwal says flows could also be higher because of dollar carry trade. This strategy works only when dollar interest rates are lower and dollar is depreciating against other currencies. ?The Dollar Index has started to come down in the past three weeks. If this phenomenon continues we could see flows come in.? ?Fund flows in the second half could be impacted this year if the Euro zone issue starts to boil over once again,? said Ambareesh Baliga, VP Karvy Stock Broking.

Baliga points out that the actual flows in the secondary market are crucial. ?Majority of the flows this year have gone into the primary markets and QIPs.?

?During an upturn India gets more than its fair share of money and in a downturn the sell-off in India is also much getter normally,? said Sabharwal.