7/12/2012 9:00 PM Thursday
Foreign Institutional Investors (FIIs) have been one of the most potent forces in the Indian equity market. After a blip caused by the Lehman crisis way back in 2008, FIIs were quite active in Indian equities in the two years that followed. However, 2011 wasn’t a great year on this front. FIIs, the most important faction that drives Indian equities, had lost interest in the market thanks to a host of macro-economic reasons. 2012 is panning out to be diametrically opposite to what happened in 2011, as the FIIs have rekindled their fancy for Indian equities.
A net of Rs 42000 crore has been invested by FIIs in Indian equities from the beginning of the year till 30th June, 2012. However, as always, just as they had begun to get a grip on the market, our own policy makers managed to scare them off (though only temporarily) by implementing the General Anti Avoidance Rule (GAAR) in the middle of March. A knee-jerk reaction to the ambiguity surrounding the tax provision led to some slowdown in FII inflows. The three months ending June 2012 saw a net outflow, though only marginal (at Rs 2000 crore).
Nevertheless, after the government issue some clarification on GAAR, FIIs have again resumed their shopping and have pumped in more than USD 1 billion in July 2012 till date. This is reason enough for us to reiterate what we had said in our Issue No. 4 (dated February 12, 2012) – ‘FIIs Are Set To Come In’.
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