Foreign and domestic fund houses, whose selling activity had triggered a sharp slide in the market earlier this year, are once again upbeat about the Indian stock market with their total investment crossing $10 billion so far in 2006.
The collective net inflow from the domestic mutual funds and foreign institutional investors has totalled $10.4 billion (nearly 47,000 crore) since the beginning of this year, with foreign institutional investors (FIIs) alone accounting for more than $7 billion.
The net purchase of equity shares by the mutual funds have crossed $3-billion mark (about Rs 14,515 crore), the data available with the Securities and Exchange Board of India shows.
FIIs have purchased shares worth a net of Rs 32,308 crore (Rs 323.08 billion) so far this year, which is marginally lower than about Rs 35,000 crore (Rs 350 billion) in the corresponding period last year.
FIIs had made a record investment of over $10 billion (Rs 47,181 crore) in the entire 2005.
Both mutual funds and FIIs have been actively trading in the market since the beginning of this year, taking their
total turnover to about Rs 958,000 crore (over $212 billion) after taking into account their gross purchase and sale deals together.
FIIs have purchased total shares worth about Rs 390,000 crore (Rs 3,900 billion) and sold shares worth about Rs 357,000 crore (Rs 3,570 billion) so far in 2006.
In comparison, mutual funds have made gross purchase of over Rs 1,12,600 crore (Rs 1,126 billion) and gross sale of over Rs 98,000 crore (Rs 980 billion) since the beginning of this year, taking their total traded value to over Rs 210,000 crore (Rs 2,100 billion).
However, FII inflows have been a bigger driver of the domestic stock market over the past few years. Market observers consider the sharp decline of about 30 per cent during May-June period this year to have been primarily driven by their huge sell-off in the market.
More than 150 new FIIs have already entered the Indian market so far this year, taking their total number to 974 as on Wedensday.
The FII inflow has gained further momentum over the past three months, with nearly half of their total net purchase this year taking place during this period.
Earlier in October, FIIs purchased shares worth over Rs 8,000 crore (Rs 80 billion), which is their highest net inflow in a month this year and the third-highest monthly investment ever.
However, some market analysts expect FII inflows to moderate over the remaining period this year as they tend to book profits toward the end of the year in order to fund their bonus payments.
However, this traditional trend has not been followed over the past few years and FIIs could continue on their buying spree in the next couple of months, they added.
