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FIIs have now bought shares worth $1 billion in the past eight trading sessions following the new Central Bank Governor Raghuram Rajan’s recent announcements, the report said.
“Following incoming Governor Raghuram Rajan’s announcements on assuaging currency markets, and particularly after the news flow over the FCNR-B swap announcements, we have seen the rupee partially recovering its losses and FIIs emerging as net buyers of close to $1 billion over the past eight trading sessions,” Deutsche Bank said.
As per the report, investor sentiments were boosted following the recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets.
These measures have resulted in imparting “long needed and much sought after credibility over both — the financing of the CAD and the actual CAD,” Deutsche Bank said.
Rajan on Tuesday met Indian Prime Minister Manmohan Singh and Finance Minister P. Chidambaram to discuss the state of the economy.
New data has shown that the economy is on the mend with the rupee now hovering around the 62 to a dollar level. India’s exports climbed 13 per cent to $26 billion in August and its trade deficit decreased to just under $11 billion, data from the Indian Ministry of Commerce and Industry revealed last week.
The ebbing of tensions on the Syrian crisis had also assuaged investors, aiding inflows. The report also said nvestors are keenly expecting a fuel price hike (both one time as well as a higher monthly calibrated hike). “Convergence of political will on critical economic issues also bodes well,” it said.
Citing anecdotal evidence, HSBC said bouts of sharp currency depreciation in India had generally been followed by periods of strong FII inflows into equities.
Earlier, between September and December, 2011, a rupee depreciation of 13 per cent was followed by a period of FII inflows of $8 billion over the next three months.
Similarly, rupee depreciation of 11 per cent over March-June, 2012, was followed by FII inflows of $6 billion over next three months.
“Investors are now watching both the Fed policy on September 18 and more importantly the RBI credit policy on September 20,” the report said.