The combined inflows of foreign institutional investors in the equity and debt markets touched Rs 4,791.30 crore (Rs 47.91 billion) during the first five months of 2003, topping the Rs 4,110.50 crore (Rs 41.10 billion) worth of inflows in the whole of 2002.

For the first time, investments by the FIIs in the equity market crossed Rs 1,000 crore (Rs 10 billion) in the current fiscal. Foreign funds pumped Rs 1,085 crore (Rs 10.85 billion) on a net basis into equities in the domestic market till May 29.

Incidentally, the FIIs' inflow into the debt market, too, crossed the Rs 1,000 crore-mark in May.

On a gross basis, the FIIs poured in Rs 4,897.80 crore (Rs 48.98 billion) during the month, the second highest in 2003 since January, when they picked up equity for Rs 5,343 crore (Rs 53.43 billion) at a net investment of Rs 1,065.60 crore (Rs 10.66 billion).

On the debt side, too, the FIIs have been very active. In May, gross inflows stood at Rs 1,263.40 crore (Rs 12.63 billion) and outflows at Rs 222.30 crore (Rs 2.22 billion).

This is the first time such heavy inflows have been witnessed in the debt market.

According to market intelligence, 30-40 per cent of the FIIs' equity exposure is in technology stocks. Market sources said they were not able to understand this since domestic investors were staying away from technology stocks except for sporadic buys following bullishness in the tech-laden Nasdaq futures.

The market is taking advantage of the optimism exhibited by the FIIs, and investors are again putting their money into equity. Hedge funds are believed to be major players in the equity market. Marketmen and dealers said low prices of most of the stocks were attracting the funds.

On the debt side, the trigger is the arbitrage between the US treasury interest rates and domestic rates. Some of the foreign funds are believed to have pumped in Rs 600-700 crore (Rs 6-7 billion) in treasury bills.

They are taking advantage of the wide spread in yields on US treasury rates and treasury bills in India. Even after hedging the currency risk in the forward market, they are managing returns of around 2 per cent by investing in treasury bills.