Fall in FII inflows cause for concern

It may be recalled that rupee’s surge against the dollar partly led to increase in FII inflows between November 2004 and December 2004. The rupee had strengthened at that time when the dollar weakened across global currencies. FIIs pumped in a net Rs 6,683.80 crore in equities in December 2004. Their inflow for November 2004 totalled Rs 6,740.80 crore.

However, the FII concern is likely to be offset to some extent by good quarterly results by companies in the coming days. The market will take cue from the Q3 results. Some of the prominent results due next week are Reliance Industries (RIL), Ranbaxy Laboratories, ICICI Bank, Tisco, VSNL, Cipla, Bajaj Auto, Reliance Energy, National Aluminium, Tata Power, Biocon, IPCL, ACC, and Wipro.

However, sentiment has turned cautious amid a surge in selling from FIIs recently and the sharp surge in global crude oil prices. FIIs sold shares worth Rs 463.10 crore in seven trading sessions between 5 January 2005 to 13 January 2005. Some of the hedge funds are said to have pressed sales.

High oil prices would weigh on auto and refinery shares. Global crude oil prices have risen sharply in the past few weeks. It currently hovers at a six-week high at near $48 a barrel. Forecasts that a bout of cold weather in the US would raise demand for heating fuels and natural gas have led to the recent surge in oil prices.