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Foreign funds bought the most Indian shares last week since February, as the nation reduced interest rates for the third time this year and developed markets maintained or bolstered stimulus programs.
Foreigners bought $802 million more of local stocks than they sold in the week ended May 3, the most since the period ended February 8, data from the regulator show. The purchases took this year's net inflows to $11.8 billion, the second-largest among 10 Asian markets tracked by Bloomberg, behind Japan. The flows have helped the benchmark S&P BSE Sensex rebound 8.5 per cent from a seven-month low reached April 9.
The Sensex capped a third week of gains May 3, its longest stretch of weekly advances since December, as the Reserve Bank of India cut rates by 25 basis points. Lower borrowing costs from Europe to the US and Japan have stoked inflows into India. The European Central Bank trimmed rates to a record low last week and the Federal Reserve said it will keep buying $85 billion of bonds a month to stimulate the US economy.
"India continues to be a big beneficiary of the easy monetary policy that global central banks are following," Arun Kejriwal, director at Kejriwal Research & Investment Services, said by phone from Mumbai. "So long as global liquidity remains strong, flows are likely to continue."
The Sensex rose 1.09 per cent, or 215 points to 19,888.95 points in Mumbai in a second day of gains, poised for the highest close since January 31. While the Reserve Bank of India cut key rates last week, Governor Duvvuri Subbarao said in an interview with Bloomberg TV India May 4 that the possibility of further easing is "practically non-existent."
RBI lowered the repurchase rate to 7.25 per cent from 7.50 per cent after data April 15 showed that the wholesale-price index, a measure of inflation, slowed to a 40-month low in March.
