Equities find FII favour, debt a shade behind

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Mumbai | November 28, 2014 12:23 AM

After drawing 18-94% lesser foreign institutional investors (FII) inflows vis-a-vis debt markets in...

After drawing 18-94% lesser foreign institutional investors (FII) inflows vis-a-vis debt markets in the last six months, equity markets on course to draw a bigger share of FII flows in the month of November.

FIIs bought $1.8-billion worth of equities in November so far, while they pumped in $1.7 billion in debt markets in the same period.

On Thursday, as per provisional data on the exchanges, FIIs bought another $64.95 million worth of shares. Meanwhile, domestic institutional investors (DIIs) bought $55.22 million worth of equities.

Experts attribute the shift to a risk-on sentiment to the Parliament session and the monetary policy. “FIIs want to see strong policy action and expect the Winter Session to yield some positive results. Apart from that, there is also the view that the conditions are ripe for the RBI governor to cut the interest rates,” said UR Bhat, director at Dalton Capital Advisors.

FII

“As RBI gets more comfortable with inflation and the government deficit declines, they will be in a position to consider a relatively accommodative monetary policy, leading to better liquidity, lower deposit costs and faster growth,” Deutsche Bank said in a note.

YTD, FII investments in equity markets stand at $15.76 billion, while in debt markets they have pumped more than $24 billion.

Foreign brokerages believe earnings momentum will drive the markets in the coming days.  “The growth recovery will likely sustain current valuations, especially as it starts manifesting in both macro and micro data points. Unlike last three years, we expect consensus earnings growth estimates of 15%+ for FY16 and FY17 to be met,” the Swiss brokerage UBS said in a note.

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