FIIs continue to be the largest institutional investors in India, followed by the domestic mutual funds led by the Unit Trust of India. The total net assets of mutual funds as on October 31, 1999 was Rs 85,442 crore. Of this, an estimated 40 per cent or about Rs 34,000 crore is accounted for by equity. FII inflows have resurged during November, helping the BSE Sensex inch toward the 5000 mark once again. In the six trading days during November, the net FII investments have been around Rs 745 crore.

This is contrary to the general perception in the market till recently that FIIs would pull out on account of Y2K fears. FII flows have proved pessimists wrong. Brokers and fund managers now believe that the new year would see fresh inflows and the allocations for India could run into a couple of billions. During 1999 (till December 8) nearly $ 1.4 billion net FII investments have come into Indian equity markets.

S V Prasad, Managing Director, Zurich India India Mutual Fund is very bullish on the FII inflows in the equity market. He feels "Basically it is good to see this kind of investment. The new government clearly means business if one looks at the fact that the FEMA and the insurance bill have been passed. These flows thus appear sustainable. The funds are not coming from a single source which is a good sign. It reflects the soundness of the economy".

A chief investment officer of another mutual fund believes that a number of short-term foreign investors have entered the Indian market in recent weeks. The Y2K fears are unfounded now, he adds. In all there are 489 FIIs registered in the country.