Deutsche Bank says fears of foreign institutional investors (FIIs) capitulation are receding as they have bought shares worth $1 billion over the past eight sessions following RBI Governor Raghuram Rajan's recent announcements.
"Recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets have resulted in imparting long needed and much sought after credibility over both - the financing of the CAD and the actual CAD," says Deutsche Bank in a report.
The bank adds since the global financial crisis, bouts of sharp currency depreciation in India have generally been followed by periods of strong FII inflows into equities. Deutsche advises investors to focus on global recovery plays, Indian rupee depreciation beneficiaries like Hindalco Industries , Tata Consultancy Services and rural plays like ITC Ltd and HDFC Bank.
FIIs bought shares worth $1 bn following Rajan's announcements
Foreign Institutional Investors (FIIs) have bought shares worth USD 1 billion in the past eight trading sessions following RBI governor Raghuram Rajan's recent announcements, a Deutsche Bank report said.
According to the global financial services major, FIIs have recouped around 25 per cent of the outflows seen over the June-August period, when the country witnessed its sharpest bout of FII outflows since the global financial crisis.
Between June and August 2013, India saw FII outflows of USD 4 billion, leading to fears of a possible capitulation by FII's, the Deutsche Bank report said.
"Following incoming governor Raghuram Rajan's announcements on assuaging currency markets and particularly after the news flow over the FCNR-B swap announcements, we have seen the rupee partially recovering its losses and FII's emerging as net buyers of close to USD 1 billion over the past 8 trading sessions," Deutsche Bank said.
As per the report, investor sentiments were boosted following the recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets.
These measures have resulted in imparting "long needed and much sought after credibility over both - the financing of the CAD and the actual CAD," Deutsche Bank said adding a tempering of the Syria risk have also assuaged investors, aiding inflows.
Moreover, investors are keenly expecting a fuel price hike (both one time as well as a higher monthly calibrated hike). "Convergence of political will