MUMBAI, JUNE 8: Foreign Institutional Investors (FIIs), who kept away from Indian stock markets for the last two months, seem to be on the comeback trail. With FIIs leading the recovery moves in the last few days, the markets may once again see a buoyant phase.

There has been a surge in FII investments in the second half of May. As a result, cumulative investment by FIIs in May shot up to $ 204.9 million from $ 148.5 million in April. ``FII investments have already touched $ 7.9 billion. Within few days it will cross the $ 8 billion mark,'' SEBI officials said. Currently, 443 FIIs have registered with the SEBI.

``The sensex had shot up by over 118 points last week thanks to FII buying. FII investment in the first week of June was encouraging. This indicates that the market is on a recovery trail and the coming days would see further rise in scrips with good fundamentals,'' said a senior director of the Bombay Stock Exchange (BSE). One factor which attracted the attention of FIIs is the Tarapore committee report which recommended a time-bound programme to make the rupee convertible on the capital account.

FIIs had widely welcomed the Union Budget presented by Finance Minister P Chidambaram in February this year. FIIs were enthused by the steep cut in income-tax rates, corporate tax and abolition of double taxation on dividend.``FIIs could not take advantage of the situation following the political uncertainty in March and April. The downfall of Deve Gowda government kept them away. Now with the Gujral government firmly in saddle, FIIs are slowly turning aggressive in the Indian markets. The smooth passage of the budget was the first signal for FIIs to come back,'' said an FII source.

He said FIIs and other big investors are now likely to shift their attention to the equity market from the debt market following the drop in interest rates. Many leading FIIs, including Morgan Stanley, had recently rated India among the best performing emerging markets.

Says a report authored by Pravin Shah of Morgan Stanley, ``although we expect the market to move sideways for a few more days, we would take this opportunity to add to existing holdings. The market could move up decisively after the petroleum product price increases are announced, especially if the government raises the prices of subsidised petroleum products more than for other products.''

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.