FIIs pump more money than entire 2006!

After a tepid start this calendar year, foreign institutional investors (FIIs) are investing with a vengeance in the Indian market. Net FII cash inflows in just a little over six months this year have already surpassed the total inflows in the whole of 2006. And half of that has come in July, which still has some way to go!

Data collated by SEBI show that FIIs invested $8.45 billion till the week ended July 13 compared to $7.99 billion invested by them in the whole of 2006. The four-year average for FII investment in the Indian market is $8 billion.

The first fortnight of July saw an inflow of $4 billion mainly due to the mega public offers of DLF and ICICI Bank which sailed through largely on FII support.

Early concerns

FII investment started on a sluggish note early this year on concerns over inflation and higher interest rates pegging back the growth in corporate earnings. The downward trend in inflation and the more benign stance adopted by Reserve Bank of India post-March led to stock prices moving up and in turn attracting greater FII investment.

In comparison, calendar 2006 witnessed tepid inflows in the first seven months — the net FII inflow in January-July 2006 was just $2.8 billion. However, they picked up in the second half to reach almost $8 billion for the whole year.

A quick study of 33 stocks of the Nifty 50, for which latest data on shareholding pattern are available, shows that Tata Steel saw a 4.54 percentage point increase in FII holdings since January; the FIIs now hold 22.65 per cent of the steel major’s equity.

Interestingly, FIIs pared their holdings in Ambuja Cements (formerly Gujarat Ambuja Cement) by a significant 6.65 percentage points between January and now; their stake in the company is now down to 27.66 per cent.

Incidentally, it is not the Indian market alone that seems to have received favourable treatment from the FIIs. The Taiwanese market received $11 billion till date this calendar while Thailand has got $4 billion.