Riding on reforms, FII inflows cross $16 bn in 2012

Written by fe Bureau | Mumbai | Updated: Sep 29 2012, 08:16am hrs
Foreign institutional investors (FIIs) are betting big on the Indian capital market. While the last one week has seen FIIs putting in more than $2 billion in Indian equities, their total year-to-date inflows have crossed the $16-billion mark.

According to data available with the Securities and Exchange Board of India (Sebi), net FII flows stood at $16.11 billion as on Friday. September has seen total FII flows of $3.82 billion. Interestingly, India has been able to attract the highest share of foreign flows among leading Asian countries in 2012.

Experts attribute the sudden flow of foreign funds to the twin factors of domestic reforms and global liquidity boost provided by central banks. The Indian benchmark Sensex (21%) and Nifty (23%) also feature on the list of the best-performing indices among the Asian pack in the current calendar year.

In CY12, FII inflows peaked in India in February, when the net inflows were pegged at more than $5 billion. While they invested more than $1.5 billion in March, there was a visible slowdown in April and May when FIIs reported a net outflow of $103 million and $273 million, respectively. July saw a revival in the flows with foreign investors putting in over $2 billion in the Indian equity market.

India is also occupying the numero uno position among leading Asian economies, excluding China. According to Bloomberg, only South Korea with a total FII flow of $13.09 billion comes close to that of India in 2012. All the other Asian economies have seen FII flows in the range of $2-4 billion each. Incidentally, Japan that typically occupies an important place among Asian allocations of foreign funds has seen FIIs invest only $3.69 billion in CY12.

The recent past has seen many of the leading foreign investors raise their Sensex targets. Investment bank Morgan Stanley has set a new target of 23,069 by the end of December 2013. The target surpasses the all-time high of 21,206.77 hit by Sensex on January 10, 2008.

Global financial majors Deutsche and Citi have also raised their respective Sensex targets. While Citi has increased its June 2012 Sensex target from the earlier 18,400 to 19,900, Deutsche has pegged its year-end Sensex target at 20,000.