FII Fears On India Abating: Deutsche Bank

After swimming out of the Indian shores in droves since late May 2013, FIIs have once again started to show interest in Indian equities. In the last eight sessions, they have invested as much as USD 1 billion in Indian equities. The returns in dollar terms, better represented by S&P BSE DOLLEX 30, are 13.67% in the same period.

In a recently released report, Deutsche Bank has sent some positive vibes, saying that the fears of foreign institutional investors flying away from the Indian markets have been on the wane. This is following the new Reserve Bank of India Governor Raghuram Rajan's announcements.

The report notes that, "Recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets have resulted in imparting long needed and much sought after credibility over both – the financing of the CAD and the actual CAD".

The bank also mentions that following the global financial crisis and sharp currency depreciation in India, there is a trend of strong FII inflows into equities. Deutsche Bank advises investors to focus on global recovery plays, rupee depreciation beneficiaries like Hindalco Industries and Tata Consultancy Services, and on rural plays like ITC and HDFC Bank.

We maintain that the FOMC meeting tonight will decide the future course of action by FIIs going forward.