FIIs skip equities, shift focus to debt market in 2011

Foreign institutional investors (FIIs) are curtailing their investments in the equities market and are instead shifting their focus to debt market where they have pumped in as much as Rs 13,798.50 crore so far this year.

Foreign investors are giving equities a skip, owing to factors such as impending slowdown in domestic economic growth, rising inflation and high interest rate regime prevailing in the country, believe experts.

Commenting on this trend, Ashika Stock Broking Research head-equities Paras Bothra said: “This is a natural shift from the FII or any other class of investor. With interest rate remaining astronomically high, portfolio allocation to debt market gets raised up in the overall composition of the asset allocation structure.”
 

FIIS NET INVESTMENT SINCE JAN 2011
Month	Rs crore

 

DebtEquity Jan 11,086.30-6,330.30 Feb -1,775.10-3,754.30 Mar 1,681.606,967.00 Apr -4587,018.50 May 2,648.30-5,158.20 Total13,183.10-1,257.30 Till May 31, 2011                                   Source: Sebi
Compiled by BS research Bureau

FIIs have so far this year made a net investment of Rs 13,183.10 crore in the debt market, whereas they withdrew Rs 1,257.30 crore from the equities market so far this year, according to the Securities and Exchange Board of India website.

“Oil/inflation and international bad news are at centre stage and FII’s keep pulling out and putting in money in accordance with news flow. Happens in any market,” Abhinav Dwivedi, Founder and President of Progressive Financial Ventures said. The Sensex has dived 9.78 per cent from the peak of 20,509.09 points in January this year and 12.74 per cent from its all-time high of 21,206.77 scaled on January 10, 2008.

The number of FIIs registered with Sebi has marginally declined from 1,718 as on December 31, 2010 to 1,716 as on May 31, 2011. The number of registered sub-accounts has, however, increased from 5,503 in December 31, 2010 to 5,833 sub-accounts as on May 31, 2011. FII inflow so far this year is in contrast to last year’s trend, when robust FII inflow helped the Indian stock markets sustain momentum. In 2010, foreign investors had purchased stocks and bonds worth about Rs 10 lakh crore, a record high for a year and nearly one-fifth of their overall investment so far.