FII bulls run riot over 8 sessions

The federal reserve’s recent announcement of a 50-basis point cut in its key interest rate appears to have served as a trigger...

The federal reserve’s recent announcement of a 50-basis point cut in its key interest rate appears to have served as a trigger for foreign institutional investors (FIIs), who have been firing on all cylinders on the domestic equity bourses.

Since September 19, 2007, FIIs have been aggressively buying Indian equities, with their net investment touching a staggering Rs 14,803.30 crore. Investments by FIIs over eight trading sessions constitutes 27.08 per cent of total FII investment in the whole of calendar 2007 and is as much as two-thirds of net investment in the month of September.

Jignesh Desai, head of institutional sales, SBICAP Securities, said, “After the US Fed rate cut, emerging markets are the natural choice for these FIIs and among them, India is looking attractive with its strong GDP growth rate and impressive corporate results. The appreciation of the rupee against the dollar has also prompted the FIIs to pump more money into the Indian market.”

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However, market experts say that a bulk of FII money flowed to a select few index constituents, thereby helping the benchmark Sensex register the quickest 1,000-point rally, pointing to the heightened role of hedge funds in the Indian market.

In order to recover their losses suffered during the US subprime crisis, some hedge funds may be aggressively buying in the Indian market so that they can book profits quickly and make an exit, an institutional dealer with a domestic brokerage house said.