FIIs pump in over $2 billion into Indian equity markets in September

Foreign institutional investors (FIIs) have pumped in over Rs13,000 crore ($2 billion) into Indian stock markets so far this month, bolstered by the new RBI governor Raghuram Rajan's assurances of policy support for investment inflows as part of the central bank's measures to prop up the weakening rupee and to revive economic growth.

Rajan, who took over as RBI chief on 4 September, announced a window for banks to swap foreign currency deposits and enhanced limits for exporters to re-book cancelled forward exchange contracts among various steps to attract dollar inflows.

The rupee also clawed back from its historic lows, gaining nearly 10 per cent in one week since Rajan took over as RBI chief.

The rupee, which touched all-time low of 68.85 against the dollar on 28 August, closed at 62.51 against the dollar on Friday.

Foreign funds bought equities worth about Rs13,228 crore ($2.09 billion) between 2 September and 27 September.

The debt market, however, witnessed a depletion with net inflows of Rs7,213 crore ($1.2 billion) as investors pulled out Rs6,016 crore ($965 million) from the market, latest data released by the Securities and Exchange Board of India (SEBI) showed.

The reversal of capital flight witnessed in August, when FIIs pulled out nearly Rs16,000 crore (about $2.5 billion) from Indian equity markets, was also supported by hopes of a continuation of the loose money policy currently followed by the US Federal Reserve.

The decision by the Fed to continue with its monetary stimulus programme also encouraged foreign investors to park funds in the Indian equities market.

Foreign investors have infused a net Rs73,398 crore ($13.7 billion) in equities since the beginning of the year 2013, while they have withdrawn Rs36,914 crore ($5.7 billion) from the debt market so far during the year.