FII Investments Fuel BSE Sensex to Record Highs – Whither Sensex

Talking about the Bombay Share Market, the Sensex has reached 20000 points. The highest point it has reached since January 2008. What could be the factors responsible for such a surge in the index? The reasons are not far to seek. The Indian economy based on fundamentals is expected to grow in double digits from the present 8.5 per cent rate. According to market regulator Securities Exchange Board of India SEBI, the net inflow into Indian equities surpassed all earlier historic levels and FIIs have pumped in hot money to the extent of Rs.33.1 billion ($724.4 million) during the preceding seven weeks, since July end.. Such surge in FII inflows have fueled the share market and explains the upsurge in BSE Sensex to 20000 point levels last witnessed in January 2008. We have finally come to a market, with its positive Market Sentiments, on a "Bull Run"

Let us now look at the expected market behavior based on our experience and available data on Foreign Institutional Institutions (FIIs). One thing for certain is that as long as the imflows surge and the appetite for the Indian scrips continue, we can expect an upbeat market, Having crossed and breached the psychological benchmark Sensex 20,000 and Nifty 6000, the Market is upbeat and and in a mood to surge ahead, with the market sentiments remaining positive. As always, when the market is to reach and cross the earlier 21000, some resistance in the form of correction and consolidation is a 'Must" for any Healthy Stock Market. We have seen through available data about the Foreign Institutional Investors (FIIs> participation, who have been net purchasers throughout this season, while at the same time the Domestic Institutional Investors have been net sellers sitting with a huge pile of Cash.

Little elaboration on FIIs activity in the recent past. Based on the Data available with Regulator Securities and Exchange Board of India (SEBI> and Bombay Stock Exchange, the total inflows of green bucks this year total to almost $ 18.13 billion – converted to Rs,82,360 crores. A notable point is that this year's inflows exceeds the FIIs inflows of 2007. Such huge inflows along with our own MFs and DIIs is said to chase the Indian Stocks to record such huge surge in Sensex in such a short time! The Indian Market looks attractive among the Emerging Markets. FIIs have bought shares worth Rs. 1,136.8 crore ($252 million) in the Indian market on Monday, which brings the year's total to $18.13 billion (Rs. 82,360 crore), according to the data showed on the Bombay Stock Exchange website.

A little more on FII inflows. The unabated surge on the FII inflows have another notable efect. When more money is pumped into the Market, the Rupee becomes stronger. The recent appreciation in Indian Rupee is testimony to this. The Reference Rate fixed by Reserve Bank of India for Dollar Rupee is 44.9200. This rate is based on the transactions of some banks based in Mumbai taken at 12:00 noon on September 28, 2010. Reversely when the FIIs liquidate their securities the value of Dollar appreciates or Indian Rupee depreciates.