Stabilising rupee, volatility in Korean and Taiwanese markets bring FIIs back to India

Mumbai, June 28 (IANS) The overall Indian stock market tone has improved following the sharp correction in crude oil prices and the return of selective foreign institutional investor (FII) buying, and a significant trend in the FII activity in the second half of this month is the tapering of FII selling, according to analysts.

During the last nine trading days (June 15-June 25), FIIs were buyers in five days in the cash market even though the buying was in limited quantities. The big relentless FPI selling appears to be over.

“There are two factors responsible for this shift in FPI activity. One, rupee has stabilised and even appreciated from the low of 96.96 to the dollar reached on May 15th. Now the rupee is about 94.40 to the dollar,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

It doesn’t make sense for FPIs to sell when rupee is appreciating.

Two, the big volatility in the South Korean and Taiwanese markets are forcing the FPIs to sell in these markets.

“On one day, the South Korean market crashed by 8 per cent, triggering freeze of trade. FPIs sitting on big profits have been selling in South Korea and Taiwan. This is persuading FIIs to again consider India despite its relative weak earnings,” he mentioned.

The crash in crude to below $73 is a huge positive for India.

The Balance of Payments crisis which India has been facing, is now behind us. Therefore, it can be safely concluded that the period of relentless FPI selling is over. But it may take some time for FPIs to become sustained buyers in India, said analysts.

Optimism surrounding a potential India–US trade agreement also supported investor sentiment, while the return of selective FII buying after intermittent outflows improved market confidence.

However, slowing domestic macroeconomic indicators and lingering uncertainty surrounding global monetary policy warrant a disciplined and stock-specific investment approach, said Ajit Mishra–SVP, Research, Religare Broking Ltd.

Globally, the trajectory of crude oil prices, geopolitical developments in West Asia, and trends in FII flows will remain key drivers of market sentiment. Progress on a potential India–US trade agreement will also be closely watched.

—IANS

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