FIIs coming back in droves

Apr 11, 2009

In this issue:
» Banking should be boring, says Krugman
» Tata Group, RIL beat GE in innovation
» IBM highly optimistic about Indian IT
» Jim Cramer a "buffoon"
» ...and more!

The last few trading session have seen the Indian markets move up at surprising speed. Part of the reason for this is that FIIs have been coming back in droves. The past week saw strong buying activity from foreign institutional investors (FIIs), wherein they pumped in a total of nearly Rs 13.5 bn. For the month of April 2009, the net FII inflow stands at Rs 10.5 bn. However, this is the highest figure recorded during the year. During the months of January, February and March, the net FII inflow / (outflow) stood at Rs (42) bn, Rs (24) bn and Rs 5 bn respectively.

Source: Yahoo FinanceSource: Yahoo Finance

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Given these strong FII inflows, the Indian markets maintained their upward momentum during the week gone by. In spite of having just three trading sessions, the BSE-Sensex ended higher by 4.4% over the closing levels of last week. Other Asian markets such as Japan (up 2.4%), Hong Kong (up 2.4%) and China (up 1%) also ended the week on a positive note. As for other global markets, Barring the UK (down 1.1%), Brazil (up 2.6%), Germany (up 2.4%), US (up 0.8%) and France (up 0.5%) ended on a firm note.

Want spectacular economic progress? Make banking boring! This seems to be the latest idea from 2008 Economics Nobel Laureate Paul Krugman. In his latest post on The New York Times, Krugman has called the financial industry as 'the monster that ate the world economy'.

He writes, "Much of the seeming success of the financial industry has now been revealed as an illusion. Worse yet, the collapse of the financial house of cards has wreaked havoc with the rest of the economy, with world trade and industrial output actually falling faster than they did in the Great Depression. And the catastrophe has led to calls for much more regulation of the financial industry."

We cannot do more that agree with Krugman given the havoc commercial and investment bankers have played with the real economies around the world, by first creating and selling complex derivative products and then by not knowing how to value their real worth when things started crashing all around.

In India as well, while the banking sector has staved off the crisis to a large extent, thanks to the super-central banker Dr. Y.V. Reddy, our investment bankers were still caught high and dry after the bust of the stock-market and IPO bubble.

Krugman believes that the ideology that fancy finance means economic progress needs to change for banking to get boring. If not, he says, the current crisis won't be a one-time event. Rather it will be the shape of things to come.


Well, the man Krugman is criticizing these days for his flawed policies - US President Obama - has said that he is starting to see progress toward a recovering economy even as it is still under severe stress. While Obama has cited increased refinancing of home mortgages, money flowing from the US$ 787 bn stimulus package and a 20% increase in government-backed loans to small businesses as positives, the fact that job losses continue has made him wary of any sustained improvement in the overall scenario.

Some of our top Indian companies continue to make their mark on the global stage. They also seem to have made it a habit out off beating some of their bigger and more well established global peers in various areas of business expertise. Now, three Indian corporate behemoths, Reliance Industries, the Tata Group and Infosys Technologies - have entered BusinessWeek magazine's list of world's 50 most innovative companies. While the rankings were topped by iPhone maker Apple, the Tata Group ranks 13th, Reliance Industries 15th and Infosys 26th. What's more, the Tata Group and RIL have been ranked ahead of American industrial conglomerate General Electric (17th), German car manufacturer BMW (20th), Japanese auto firm Honda Motor (22nd) and telecom major AT&T (23rd). Go India!

Valuations are indeed mouthwatering, atleast enough to make sophisticated investors such private equity investors and venture capitalists jump into the secondary market. As per an Economic Times report, these savvy group of investors are stepping into the secondary market to increase their stakes in several companies and add new stocks to their portfolios. They include the likes of foreign investors like Baring, Standard Chartered PE, New Vernon and Acacia Partners. These players, who rarely ever took the open market route during the bull run due to high valuations, have in the past one month alone acquired either additional or fresh stakes in numerous companies.

Jim Cramer, controversial host of the CNBC show 'Mad Money', is in the middle of a heated battle of words again, this time with economist Nouriel Roubini. Roubini has denounced Cramer as a "buffoon" while Cramer has criticised Roubini for being 'intoxicated' with his own 'prescience and vision'. The main contention between the two is regarding the recent rally in the stock markets. Roubini is of the opinion that it is a rally a bear market rally while Cramer said Roubini should realise that things have indeed gotten better since the market bottomed in early March.

In an interview, Roubini said that Cramer is 'not a credible analyst' because he keeps declaring each bear market rally to be the start of a new bull market. As we have been reporting in previous issues of The 5 Minute Wrapup, CNBC has in recent times come under severe criticism in the US for various reasons relating to frivolous reporting practices.

Click here to vote in our 'Fix the CNBC' poll.

Here is some good news for home buyers. As per a national poll conducted by Edelweiss, realty brokers in India are expecting residential property prices to decline by 25% to 35% from the current levels over the next couple of months. While 76% of the brokers expect prices to decline over the next three months, 53% of them see the trend continuing throughout the year on account of weak economic environment. It is expected that muted demand may soon push real estate companies to slash prices which are anyways encumbered by huge unsold inventory and high interest costs arising out of their high debt burdens.

The Indian domestic IT sector is growing at a scorching pace. As per a leading research firm, the domestic IT services market is expected to grow to US$ 8.1 bn by 2011 as against US$ 4.1 bn in 2007. The world's biggest computer-services provider, IBM (International Business Machines Corp) is all set to take advantage of this rapidly growing Indian market. The company is going all out to spread its tentacles in the Indian market and grab customers to make its way to the top slot. IBM has recently snapped up some of the large domestic contracts from Bharti and Kotak Mahindra Bank. It has already captured more than 13% of the Indian market, which includes technology and business consulting services. Ironically, its Indian counterparts like TCS (9.7%), Wipro (4.5) and Infosys (0.2%) has a lower market share in the domestic market. Furthermore, IBM's India focus can be gauged from the fact that the company is hiring in India, while it is reducing jobs elsewhere.

One expects Chinese goods to face protests from blue collared workers. Similarly, the Indian outsourcing industry also faces protests from white collared workers. However, it is rather unusual to find 'Made in India' goods to make their way into the US and then to be at the centre of protests. As per Mint, hundreds of US steel plant workers have been protesting the use of India-made steel in an oil pipeline project at Granite City, Illinois. The workers carry banners saying 'Buy American' and 'Rebuild American Manufacturing'. They find it ironical that about 2,000 steel workers have been laid off in a nearby mill. While, we do not wish for anyone to lose their jobs, it must be remembered that the average US MNC has had a huge role in globalisation. Economics is seldom a one-way street.

 Today's investing mantra
"You do not gain as much from periods of unusual prosperity as you lose in periods of depression when you are in business. That is almost an axiom" - Benjamin Graham

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3 Responses to "FIIs coming back in droves"


Nov 4, 2009

Pls let me know whether FII's are coming in Indian market in which sector and in which industry and industrywise revenue breakup.



Apr 13, 2009

I have purchased 150 satyam @ Rs 47. should I holdsell.


Piyush Shah

Apr 12, 2009

Shakkar jahan hoti hai wahan bhukhi madhumakkhi ko to zarur ana hot hai. Kudrat ka niyam.

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