After six months of being net sellers in the market, the FIIs, in December, were net buyers. That is probably the first indication that the pressure to liquidate holdings has eased and the return on investment has once again become an important consideration in deciding on the choice of asset.

FIIs have been keen investors on the Bombay and National Stock Exchanges. In 2007 their net investment was $17.2 billion, the highest in any year so far. That was the third consecutive year when the Indian economy had crossed 9 per cent growth and held enough promise that it would shoot up further. Before that could happen the markets the world over were overtaken by the US financial crisis and subsequently by US recession.

That turned the FIIs into net sellers. The total disinvestment in 2008 was $13 billion Even after the disinvestment the FIIs were holding Indian stock to the extent of $53 billion or about a fifth of the total floating stock.

Although FIIs retreated from the stock market after the US crisis they showed enough interest in the debt market partly because the rate of interest was sufficiently attractive and partly because the Indian Government allowed larger FII investment in debt. The net investment in debt securities was $3 billion.

In spite of the market reverses FII interest in Indian stock markets continues. Since the financial crisis, 120 new FIIs registered with SEBI taking the total number to 1581 with thrice the number of sub-accounts.

source: Economictimes

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