These factors are set to play out in a similar vein in the next six months. So it is quite possible that FIIs may be inclined to ramp up their debt exposures. Six to eight months from now, FIIs may be inclined to lock-in to the returns and then take a fresh view of Indian debt. Equities, a turnaround: Usually, the January-March period is a good one for FII flows. But not so in 2003, as just $338 million found their way into stocks. April's inflow at $90 million lived up to the billing in the first quarter.

Had this trend continued for the second year running, FII flows would have headed for a less than $1-billion finish. The trends have, however, changed rather dramatically over the last two-and-a-half months. Even if the usual weakness emerges in the August-November period, FII flows into equities in 2003 are likely to be in excess of $1 billion.

Outlook for flows: Given the sluggish state of economies in many countries and the firm trends in industrial growth, the strong rupee and the good monsoon in India, selling may not be as pronounced as in some of the earlier years. This assumes importance, as the absence of FII selling has been a crucial factor for stock prices to show firm trends. Their selling has, more often than not, led to price declines.

The more likely outcome for 2003 is FII flows tapering off to modest levels in the second half of the year. For instance, in 2000, net FII flows were just $68.6 million. But they continued to trade in a hectic manner and churn their portfolios. In the subsequent two years, despite a slackening of pace, FIIs invested $250-300 million in the July-December period. But a sizeable proportion of these flows came through in December making up for their selling in earlier months. A repeat of such a trend may not be bad for equities. If FIIs stay on a buying mode, no one would grudge that either.

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