$6 bn: the amount FIIs have pumped in this yr

Market players said an appreciating rupee and a slide at the bourses since April played a key role in the increased inflows from the FIIs.

V K Sharma, director and head of research, Anagram Securities said, “Most of the buying by the FIIs in calendar 2007 has been during the second quarter (April-May to date) when the markets have undergone a long correction from the higher levels after peaking in February. Also, an 8-9 per cent appreciation of the rupee in the last 45 days helped.” He said, if the Indian currency continued to strengthen against the greenback, the inflows might gather more pace and cross the all-time high mark of $10 billion witnessed in 2005.

But some analysts cautioned that rising interest rates and high inflation might pose a challenge to the economy, which in turn might adversely impact the profitability of India Inc. In this scenario, the FIIs might re-think their investment strategy, they warned.

Analysts said though Indian valuations were at a higher level, there was still room for companies to grow. Hence, more and more foreign funds were being deployed in Indian equities, they added.

Krishnamurthy Vijayan, wholetime director & CEO of JP Morgan Asset Management Company, said, “There is absolutely no reason why India should be talking about a slowdown in FII inflows. The economy will remain healthy for at least for the next 3-5 years on the back of strong corporate growth and 8 per cent-plus GDP growth.”

“The increase in the FII money only goes to show their confidence in the India story, which in the next 3-5 years may well reach approximately $20 billion,” he added.