FII inflows jump to Rs 3,625 cr in Jan

Low valuations of stocks, easing of global markets particularly Nasdaq and good cash positions could be stated as the reason for the massive inflow according to some FIIs. Said HSBC Securities and Capital Markets (India) director and head of research Vasudeo Joshi, "The parity had come down to the level that stocks seems to be attractive."

According to Jardine Fleming’s director and chief investment officer UR Bhat, "FIIs are redeploying the money they have accumulated resulting from past sales done in IT stocks." During December, many FIIs had raised cash. According to some FIIs, after the huge inflows cash positions of FIIs would have now come down from 15 per cent to 7 per cent.

Expectations that the budget would give a big push to infrastructure could have also led to FIIs getting bullish. Says Mr Bhat, "Big foray in infrastructure will result in demand for products and services." There is also a talk that global rating agencies would raise India’s rating after the budget.

Sensex had gained nearly 425 points in the last one month, thanks mainly to FII inflows. On Thursday, Indian markets closed in the positive terrain for the tenth successive day. The bellwether Sensex closed little changed at 4330.22 as against yesterday’s close of 4326.42, up by 3.80 points.

Yet analysts said despite the strong earnings growth, investors were unlikely to turn aggressive buyers of software stocks as they would wait for a clearer picture to emerge of the US economic outlook. Evidence that the world’s largest economy looked likely to keep growing, extending the unprecedented current growth spurt into an 11th year, would influence the business prospects of Indian companies and reassure investors of their sustained high growth, analysts said.