Market makes further gains as FIIs turn net buyers

 The stock market rose sharply on Wednesday on the back of heavy buying by foreign institutional investors. 

The Sensex surged 5.37 per cent, closing almost 500 points up, at 9654. The broader Nifty was up 5.18 per cent.

FIIs have been net buyers of equity in December so far. Their net purchase of shares for Rs 950 crore on Wednesday gave rise to some debate on whether this indicated a reversal in their investment outlook on India.

The most common explanation from market-men was that many of the bigger FIIs (who have been sellers in the market) have scaled down their operations for December as they are on vacation. Since they did not participate much the selling activity is pretty low, they said.

“One shouldn’t look at a couple of days’ data to generalise that the FII-trend has reversed,” said Mr Anil Advani, Head of Research at SBICAP Securities. “The FIIs will look for an opportunity to sell at higher levels in the future.”

It is unlikely that FIIs will stop selling as they need funds at this time what with the current global slowdown and their own houses on fire, said a fund manager.

Towards year-end, the redemption pressure on FIIs is coming down; hence the recovery in the markets today, said Mr Dharmesh Mehta, Head of Broking, Enam Securities Ltd.

The strengthening of the rupee against the dollar is also a sentiment booster for FIIs, said a broker.

According to market men, the fiscal and monetary packages announced last week has kept up the positive sentiment and pushed up stocks, mainly in the auto and realty sectors, on which considerable emphasis was laid in the stimulus package.

The positively trading US index futures fuelled the uptrend in the market, according to Mr Alex Matthew, Head of Research, Geojit Financial Services.

While the global cues were mixed, the talks of an expected bailout plan for US auto-makers boosted Indian stocks, said some market-men.