The equity markets witnessed a net inflow of Rs 5,400 core from overseas investors during November, taking their total investment in the country so far this year to over Rs 73,100 crore, the highest ever inflow in a single year.
In November, foreign institutional investors (FIIs) bought shares worth Rs 51,063.10 crore, and sold equities worth Rs 45,565.90 crore, resulting in a net investment of Rs 5,497 crore, according to the data available with the market regulator Securities and Exchange Board (Sebi).
The record inflow by FIIs into the local stock markets has alarmed the government and other authorities concerned. It has also made industry chambers like Assocham demanding a two-percentage point tax on FII funds, while exporters body FIEO demanded government intervention to contain the flow as it had been making the rupee stronger against the American greenback, rendering exports incompetent from price angle.
After turning negative following the collapse of the global financial services icon Lehman Brothers in the middle of September last year, FIIs inflow into the domestic stock markets have begun to rise sharply.
Last month, Finance Minster Pranab Mukherjee had said that investment into the equity markets by foreign investors was not a matter of concern, but the government would act if it finds any distortions.
Describing the foreign capital inflows as the success story of India's recovery, Reserve Bank Deputy Governor Subir Gokarn on Monday said that the inflow should not be viewed as a threat at this point of time.
"You could see them as a positive sign which is that they reflect increasing global confidence in Indian recovery," the newly appointed Gokarn had said.
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The trend of strong FII inflows to the tune of Rs 31,000 crore witnessed during the June quarter gained further momentum during the July-September period, which attracted a net Rs Rs 34,313 crore.
Last year, FIIs were net sellers of the domestic stocks worth Rs 52,900 crore. The selling trend of FIIs continued till the first two months of the current year. However, by the end of March they started betting big on the domestic bourses.
So far this year, the Bombay Stock Exchange's benchmark index Sensex--composed of 30 blue-chip stocks--has risen over 70 per cent.