FII flows in debt, equity close to $30 bn in CY14

Aug 28 2014, 04:33 IST
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SummaryCombined inflows in CY14 close to becoming second-highest ever.

Fuelled by expectations of an economic recovery and a stable government at the Center, the combined inflows in debt and equity markets in CY14 look set to become the second-highest ever. The $30 billion invested by foreign institutional investors (FIIs) in CY14 so far, is just a couple of billions away from equaling the investments seen in entire CY12.

Experts say that the macro-economic indicators point in the direction of a recovery.

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“Incoming data support our standing call that growth will bottom out in FY15. We have upgraded three of our 10 lead indicators for the first time since April 2012 when they signaled bottoming out. First, we raise loan demand to neutral from negative as we see it bottoming at current 11.2% levels. Second, we have raised confidence to positive from neutral with our (·M1/·M3) risk aversion indicator bottoming out. Finally, we have upgraded industrial production to neutral from negative,” BofA-ML said in a note.

Among its emerging market peers, Indian equities have attracted the bulk of FII flows at $12.79 billion, making the BSE benchmark Sensex the best performer among its emerging market peers with gains of 28.65% in dollar terms.

The experts feel that the June quarter’s GDP, to be released later in the week, could be at a two-year high. “Year-on-year IP growth during the April-June quarter has improved appreciably to a three-year high. This implies a robust pickup in industrial sector GDP growth for April-June as well, which is likely to push the headline GDP growth higher by about 100bps than the previous quarter’s outturn,” Deutsche Bank said in a report.

Deutsche Bank’s estimate of a 5.6% growth in June quarter, would be the sharpest rise seen in 9 quarters. Meanwhile, the Tokyo-based financial services company Nomura expects the GDP to rise to a 10-quarter high of 5.9%. The combined FII flows in the debt and equity segment since May 16, when it became clear that BJP has won the elections with a clear majority, stands at $17 billion.

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