'FIIs to continue on policy reforms'

With foreign investment in Indian stock markets crossing USD 11 billion so far this year, market experts expect FII inflows will continue on a sustained basis in the future amid hopes of government's initiatives on policy reforms.

Foreign Institutional Investors (FIIs) have infused a net amount of USD 1.02 billion (about Rs 5,692 crore) in August so far, taking the total for this year to USD 11.4 billion (Rs 57,958 crore) in Indian equities, according to the Securities and Exchange Board of India (Sebi).

According to market analysts, despite a slow economic growth, high interest rate regime and weak monsoon, overseas investors are showcasing confidence in the Indian stock markets amid expectations of the government's fresh initiatives on policy reforms.

"I think FII inflows will continue in the domestic equity market, given the fact that last year was bad for stocks. Also, weakness in the rupee is also favouring overseas investment. But, the biggest trigger is that FIIs are pinning hopes on the government's fresh initiatives on reforms. However, if there are no policy reforms, we might not see the FII flows being sustained at the current levels," Rajesh Jain EVP Retail Research Religare Securities said.

Echoing similar views, Geojit BNP Paribas Research Head Alex Matthews said, "FII inflow is likely to continue as hopes of policy reforms announcement are still alive. But, if there are no reforms announcement, there might be slowdown in inflow or could be a pause as well."

Marketmen also said the reason behind the renewed confidence by the FIIs in Indian markets is government indicating a soft stance on the controversial General Anti- Avoidance Rules (GAAR) and retrospective taxation issues.

During August 1-17, FIIs were gross buyers of shares worth Rs 26,363 crore, while they sold equities amounting to Rs 20,670 crore, translating into a net investment of Rs 5,692 crore (USD 1.02 billion), as per Sebi data.

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