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K.S. Badri Narayanan
Sharvari Patwa

Chennai/Mumbai, Sept. 25

With Sensex just short of the 17,000-mark, foreign institutional investors (FIIs) have been mainly responsible for the BSE’s recent surge that started on September 19. FIIs have pumped in over Rs 13,000 crore in cash as well as derivative market between September 19 and 24. The BSE Sensex skyrocketed by about 1,200 points or 7.9 per cent.

On the other hand, retail investors, domestic institutions, including bank, domestic financial institutions, insurance and mutual funds, and non-resident Indians were net sellers.

Benchmark indices across the globe rallied sharply after the US Federal Reserve cut a key short-term interest rate by a half-percentage point, reassuring investors that it was taking aggressive action amid the credit and mortgage market meltdown.

International market analysts viewed the rate cut to act as a trigger for money to be redirected into emerging markets such as India.

“Indian markets are looking relatively attractive vis-À-vis other markets. It is basically the arbitrage money in F&O’s also which is adding to the FII amount,” said Mr Sandeep Shenoy, Strategist, Pinc Research.

Analysts feel that F&O are extensively used as hedging tools.

“With the Sensex going up, the hedging requirement of the portfolio also increases. As such the market scaling new peaks mean that FIIs keep adding to their F&O portfolio,” said Mr Aalap Shah, Derivatives Research Analyst, Dolat Capital Market Pvt Ltd.

Also with the addition of new stocks to the F&O universe the FII increasing their exposure to this segment adds to the liquidity too, added Mr Shah.

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