Foreign boost for mkts as FIIs put in record $26 bn in FY13

The current financial year has proved to be the best ever for Indian markets in terms of foreign inflows. The year has seen foreign institutional investors (FIIs) putting in $26 billion in Indian shares, which is the highest ever since overseas entities started investing in India.

Interestingly, the increased pace of investments in the recent past helped the year score over FY11 when foreign entities had invested $24.3 billion.

According to the Securities and Exchange Board of India (Sebi), which maintains data on FII flows since 1992-93, there have been only three occasions when FIIs have invested more than $20 billion ? FY13, FY11 and FY10.

Experts say that while there seems to be some amount of underlying weakness in the equity market, foreign investors are increasingly betting on economies like India at a time when Europe is once again in the midst of uncertainty.

Incidentally, the latest fund manager survey by Bank of America Merrill Lynch stated that ?optimism? on the Indian market ?improved notably? in March. Data from the regulator further shows that the pace of foreign investments picked up in the recent past, with most days in March registering FII flows at more than $100 million.

The current calendar year has seen FIIs putting in over $10 billion in a record time of less than three months.

The pace had slowed down a bit just ahead of the Union Budget on concerns related to taxation of overseas investors and lack of policy reforms. On February 28 when finance minister P Chidambaram presented the Budget, FIIs were net sellers at $238 million.

The Indian benchmark indices, however, remained subdued even though record liquidity was provided by foreign investors.

The financial year FY13 saw the Sensex and Nifty gaining only 8.2% and 7.31%, respectively, as domestic institutional investors (DIIs) largely stayed away from the market.

?DIIs have been net sellers of equities for three consecutive years (in sharp contrast to FIIs)? and selling accelerated in FY13, with life insurers becoming big sellers,? noted a recent report by Citi. Among the sectoral indices, BSE FMCG emerged as the top performer of the fiscal with gains of nearly 32%, followed by BSE Healthcare (20.9%) and BSE IT (13.2%). On the other hand, BSE Metal (down 22.8%) and BSE Power (down 21.3%) were the worst performers of the year.