This year's data beats the past record of $17.6 billion, witnessed during the frenzied 2007. As a result of this unprecedented inflow of funds from abroad, the Indian rupee is appreciating against major currencies, mainly the US dollar, and the leading indices are rallying to multi-year highs. On Monday, the rupee hit a four-and-half-month high against the greenback and ended at 45.10 to a dollar, compared to its Friday close at 45.25. And on the BSE, the sensex gained 72 points to end at 20,117, a 32-month closing high.
Institutional dealers and top officials at broking houses said a major portion of this large chunk of FII money is coming either through the exchange traded fund (ETF) route or from smaller countries where investors are now waking up to the India story. "ETF money will keep coming as long as we continue to give good return,'' said Ambareesh Baliga, VP, Karvy Stock Broking.
"We are in a virtuous cycle now,'' he added. An ETF is a fund that tracks a particular market or an index and tries to have a portfolio that replicates the weight of the index that the fund is tracking. While the upside, so far, looks good, but market players also warned about the downside of unabated flow of ETF funds into the Indian market. In case the India market stops giving good return and turns the other way round, the ETFs will start withdrawing and "we could be in for a vicious cycle,'' said Baliga.
A dealer with a local primary dealership said that while in the inter-bank market the rupee closed at 45.02 to a dollar, in the non-deliverable market the rupee was nearly breaching the 45-mark and speculation in that market was also on the ascent. In the government securities market, the benchmark 10-year Gsec yield closed Monday's session at 7.86%, down from nearly 8% level a few days ago.
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