Foreign institutional investors (FIIs) are likely to pump in roughly $5 billion during 1997, according to initial market estimates.
A crucial meeting of leading FIIs is scheduled for the end of the week and most of these institutions feel that fund allocations will definitely not be lower than that in the previous year. A clear picture will emerge within 10 days, sources say.
Morgan Stanley expects portfolio investment of $300 million per month to flow into the Indian markets. This is similar to the amount registered last year.
Markets indices have shown an uptrend over the last month, with the BSE sensitive index moving up 19 per cent to 3260. While marketmen are still sceptical of whether a bull run has commenced, the sensex could move in a narrow range touching the 3400-point mark, with a correction at around 3450 levels.
The 175-point rally witnessed by the market on the January 1, 1997 put the market in an overbought position with a section of marketmen talking about a `warehouse phenomenon. According to market circles, the market is overvalued at the moment and punters have bought in anticipation of a further rise in stock prices. This projection is on account of two factors. The government has made efforts to boost the capital market late last year and fresh allocations are to be made by the foreign institutional investors for the emerging markets.
Says Vinay Kamat, head of research at JM Share & Stock Brokers Ltd: It is expected that about $5 billion worth of FII investment (including GDR money) will pour in during the year. Last year it was approximately $3 billion which is not bad considering the bearish phase witnessed by the market.
Sanjay Agarwal, chief executive officer of Lloyds Securities feels that even if allocations are now made by FIIs, the actual flow of funds will take some time. The FII investment in India will depend on the budgetory announcements that are likely to be made. These institutions may make an allocation for India and not invest immediately but wait and see before taking an investment decision.
Sources at a UK-based global investment bank say there is a possibility of the markets moving in extremes this year. The factors which will dominate the sentiments will be the record highs at the US markets and the ongoing political uncertainty wherein equations could change in the coming months.
Leading stock broker Nipun Mehta said, The badla rates have also improved in the market. Earlier, they were hovering around one per cent. However, now they have risen to about 1.5 per cent levels which indicates good demand for funds.
Another interesting factor that indicates high speculation is that when the sensex moved up 175 points on New Years Eve, the foreign institutional investors were net sellers on the BSE. FIIs bought shares worth Rs 7 crore and sold shares worth Rs 13 crore resulting a net sale position of Rs 6 crore.
The BSE statistics on long and short positions on the bourse as on January 1 indicate that of the 60 A group scrips, 44 scrips witnessed long purchases.
These include stocks like SBI, Tata Steel, Telco, Tata Power, Colgate, Oriental Bank of Commerce, Escorts, Indo Gulf which are considered to be the ones in which FIIs have shown buying interest in the past.
Commented a leading institutional broker: This clearly indicates that those who bought shares in the market have done that in anticipation of better appreciation when fresh allocations are made by FIIs and they indulge in buying Indian paper.
