Foreign institutional investors (FIIs) are back to the Indian equity markets with a bang. "The US' loss is emerging markets' gain," say fund managers.
The accounting scams at the US-based WorldCom, Xerox and Merck which rocked the US markets have diverted the fund mangers to emerging markets.
According to Vipul P Dalal, chief operating officer (institutional equities), Investsmart (India) dotcom, "The corporate scandals in the US have diverted the fund managers' attention to emerging markets."
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Moreover, with worries over an India-Pakistan war and rites in Gujarat over, and the political scenario showing stability, there are no negative factors detrimental to FIIs' fund flows.
FIIs made net purchases of Rs 432 crore in the last 10 trading sessions -- from June 25, 2002, to July 8, 2002. However, there was net selling worth Rs 42.4 crore on Tuesday due to profit-booking, fund mangers said.
This has been after net sales of over Rs 426.5 crore worth equities between June 13, 2002, to June 24, 2002.
FIIs made net sales of Rs 445 crore during the first quarter of fiscal 2002-03 (April-June). However, net purchases of Rs 183.8 crore since July 1, 2002, placed them to be net sellers worth Rs 261.6 crore.
In fact, the conducive divestment on way has instilled fresh confidence among overseas investors, fund managers said.
That apart, the sentiment is upbeat with the first signs of an economic revival, and given the compelling valuations, investors would like to reap the benefits of the revival in the beginning itself, Dalal said.
The US markets are not all that rosy for the investors over there and lately foreign portfolio investors have identified emerging markets as high-return destinations to divert their funds from the US.
Until now emerging markets were neglected by the FIIs mainly because of poor corporate governance, transparency and disclosure norms.
However, with many companies now adopting the US generally accepted accounting principals, the potential to attract FII funds is huge provided the country has a regular monsoon, fund managers said.
There has been a marked improvement in the old economy sectors in India in the last couple of months indicating a slight improvement in the overall economic and industrial activity. "This has also propped up the positive sentiment among the fund managers," head at a joint venture foreign stock broking house said.
Old economy stocks, especially in sectors such as steel, cement, automobile, auto ancillary, paper, chemicals and banking, rose amid hopes of a recovery in these sectors.
Investors made purchases in select stocks on expectations of improved results for the quarter ended June 30, 2002, and also the next quarter ending September 2002.
During April and May, the consistent negative developments in the country had drastically reduced foreign portfolio investments.