Contrary to the general perception that foreign institutional investors (FIIs) have been pulling money out of the country ever since the Lehman-Merrill Lynch crisis intensified a week ago, they have actually made net investment in India if equities and debt are put together. The debt investment could be temporary but it shows that FIIs are not deserting India. Once the stock market stabilises, most of this money could come back to equities.

$1.23 billion The money FIIs have pulled out since September 10 when Lehman started reeling under a big crisis

$ 2.6 billion The money they invested in the Indian debt market in the sameperiod

Changing tracks in September

FII outflow in equities $ 1.40 bn

FIIs inflow in debt $ 2.80 bn

Why FIIs head to debt market

Obviously, the returns are more in India. There aren’t enough good investment avenues in the crisis-ridden US market

8 per cent The return on 10-year benchmark government securities — four times the yield in the US

Indian debt is Attractive in the global market. while an investor can get returns of around 2 per cent by investing in debt instruments in the US, it can be around 3-4 times higher in India. In the present scenario of global credit turmoil, FIIs are finding sovereign debt instruments in India more attractive than equities Vikrant Gugnani, CEO, Reliance Mutual Fund.

But then, why was dollar so hot?

... contd.