Foreign Portfolio Investors (FPIs) continued to stay invested in the Indian equities market for the week ended March 5 on the back of post-budget expectations and an unexpected lending rate cut by the apex bank.
For the week ended March 5, the FPIs bought stocks worth Rs.6,861.65 crore or $1.10 billion, according to data with the National Securities Depository Limited (NSDL).
Post-budget expectations of more market reforms and the Reserve Bank of India's cut in the key lending rates by 25 basis points glued the FIIs attention on to the Indian markets.
During the previous week ended Feb 27, the FPIs had invested in stocks worth Rs.4,625.81 crore or $745.32 million.
The foreign institutional investors (FIIs) along with sub-accounts and qualified foreign investors have been clubbed together by market regulator Securities and Exchange Board of India (SEBI) to create a new investor category called FPIs.
"The FIIs flows have been good till now. Post-budget, the FIIs will now be focused at the pace of reform process and the on-going parliament session," Devendra Nevgi, chief executive, ZyFin Advisors told IANS.
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"The FIIs will keenly follow parliament's proceedings especially the government's ability to pass more bills."
The healthy FII flows helped the Indian markets to make gains during the previous week. The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) closed the weekly trade at 29,448.95 points, up 87.45 points or 0.29 percent.
However, in the coming week the FIIs may turn their focus away from the Indian markets as a sharp increase in the U.S. non-farm payroll data for January and a slow rebound in oil prices may lead them to the developed markets.
The U.S. non-farm payrolls rose 295,000 jobs last month. The unemployment rate fell to 5.5 percent from 5.7 percent in January.
The Indian markets were anxious as rapid increases in non-farm payroll data might lead to an increase in inflation.
This can make the US Federal Reserve raise interest rates sooner than previously expected. With higher interest rates the foreign institutional investors (FIIs) will be led away from the emerging markets such as India.
"The Indian markets are better placed than their BRICs and Asian counterparts. The markets fundamentals are strong. The inflows will also continue on the back of the enormous potential of the Indian economy in the long-term,"
The next major triggers for the FIIs interest in the Indian markets will be the on going budget session and the inflation and industrial output data for February which will come out in the middle of next week.