Behind the Stock Market Boom

THOUGH 1995-96 will be remembered as a lustreless year for the Indian capital market, it was nevertheless one in which foreign institutional investors (FIIs) pumped in more than $2 billion into the market. The inflows from the FIIs were declining in the initial months of the year, but they picked up in the last few months. FIIs registered the highest ever business volume in February, making gross purchases worth Rs 1,825 crore and selling shares worth Rs 270 crore. As a result, net portfolio investment by FIIs was an all-time high of Rs 1,555 crore ($435 mn) in the month and this was followed by net investment of Rs 1,056 crore ($307 mn) in March, bringing total net investment by FIIs in 1995-96 to $2.03 bn against $ 1.50 bn in 1994-95. Nearly one-half of the investment ($ 1.01 bn) was made in the last quarter of the year. The frenzy of buying by the FIIs has continued in the new fiscal year. It is expected that net FII investments in each of the first two months of the year will be about $500 mn (Rs 1,725 crore), surpassing the February peak.