Market, rupee surge as FIIs turn aggressive buyers

Clarity on GAAR and positive signals from the European union (EU) pushed up the equity market on Friday. Analysts say that the mood was upbeat after a volatile week. Thanks to these developments, foreign institutional investors pumped in more than half a billion dollars today. The NSE Nifty ended up 2.5 per cent (130 points) at 5,279, while the BSE Sensex was up 2.6 per cent (439 points) at 17,430.

The rupee also appreciated sharply on Friday (gaining over a rupee from Thursday’s close of 56.80 to a dollar) and closed at 55.67 to a dollar.
On Thursday, the Government set out the draft guidelines for General Anti-Avoidance Rules (GAAR) which would exempt foreign investors from retrospective taxes and give them concession on P-Notes (Participatory Notes). This apparently made investors believe that the Finance Ministry was now looking at taking positive measures to kickstart the investment cycle, said analysts.

“With the statements on GAAR, the presumed hostility towards FIIs seems to be thawing. There is now an expectation that the Prime Minister, Dr Manmohan Singh, as the acting Finance Minister, will take swift decisions,” said Mr Prakash Diwan, Chief Portfolio Strategist, Wealth Circle. FIIs were net buyers at Rs 3,047 crore on Friday. Domestic institutions were net sellers at Rs 251 crore. Retail investors, on the BSE, booked profits and were net sellers at Rs 1,089 crore.

MAURITIUS ANGLE:

According to Mr Diwan, only about 18 per cent of the foreign capital flows into India is channelled through Mauritius.

The Euro zone leaders agreed on a deal to stabilise Europe’s debt markets and recapitalise its banks to ease the funding strain on Spain and Italy.

Due to this, European indices were trading higher by 2.4 per cent when the Indian bourses closed. Among the Sensex stocks, the top five gainers were Jindal Steel (up 8.8 per cent), Tata Power (5.8 per cent), ICICI Bank (50.3 per cent), BHEL (4.9 per cent) and Sterlite Industries (4.9 per cent). Coal India was the only stock in the negative, down 0.14 per cent. On the BSE, the capital goods, power, banking and metal sector indices were up more than three per cent.

DOLLAR SELLING:

“Increased dollar selling in huge lots from the foreign banks and steep rise in the euro also led to the rupee making gains. In addition, month-end closing kept oil importers off the markets,” said a chief dealer of a nationalised bank. The rupee consistently gained after touching an intra-day low of 56.66. It opened 19 paise higher at 56.61 on the inter-bank market.

Courtesy: The Hindu Business Line