Will foreign fund managers continue to pour money?

MUMBAI: The Diwali day trading on Dalal Street , as expected , ended an action packed week on a high that started with RBI’s policy decision , followed by the US Fed’s economic stimulus package and reached a crescendo with Coal India listing on Thursday . For investors ,the time has now come to look forward to see what is in store for them over the next few months .

As of now , the biggest question for investors , brokers , dealers and other marketmen is will the foreign fund managers continue to pour money into the stock market , like they did during the last two years . Consider this: Since the BSE sensex had touched a low of 7,700 level in October 2008 , FIIs have net infused nearly $44 billion into Indian stocks. As a result , the sensex is nearly three times what it was then .

Since the memories of the global financial market meltdown of 2008 and 2009 are still fresh in investors’ mind , they are cautious now . Usually , FII fund managers book some profit in their portfolios towards the end of the calendar year , and the same could start now . “They need to take some money home which will pay for their bonuses ,’’ said an institutional dealer with a domestic brokerage house.

Analysts feel that there could be a correction of around 10 % in the stock markets over the next few months .Usually profittaking happens in November-December and FIIs come back to the market after they get their fresh allocationsduring the second and third week of the new year .

This year , however , things could be a little different and they might continue to sell, said Arun Kejriwal , director , KRIS , an investment advisory firm . “They might decide to sell now because they have made good money in their portfolio . Additionally , the rupee has also appreciated against the US dollar . So if they sell now and take money home ,they would benefit on both counts ,’’ explained Kejriwal .

So far this year , net FII inflowin stocks is nearly $27billion . During the same period , while the rupee has appreciated nearly 5% to 44.21 to a dollar now , the sensex is up a little over 20%. Another factor that could affect the rupee is the rising crude prices . After Fed announced its second stimulus package worth $600 billion , sensing higher demand for oil, global crude oil prices have shot up and is trading at $87 per barrel.