X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Net to Net. - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Apr 7, 2000

    Net to Net.

    One of the good things about the power of the internet is its ability to get information pretty quickly. One of the not-so-good things about the internet and computers is that there is so much information available that what does one look at? How does one sift the valuable from the junk? Well, if anyone out there has an idea to replicate the thought process of the brain, let us know: I would love to invest in the venture. Who knows, a Nasdaq listing may be a possibility. Not to forget all those ESOPs...

    But, meanwhile, lets try and solve this puzzle.
    Till about May, 1999, the net outstanding positions (gross purchases-gross sales) on the BSE were about Rs 10 billion (Rs 1,000 crores or US$ 260 million) and the BSE-30 Index was trading between the 3,200 and 3,400 range. Slowly but surely, the Index began moving higher and the net outstanding positions kept pace with it. As the market went up, more people got into the game and the more money they threw at the market, the higher it got, and that attracted even more people who threw even more money into the market.

    That is what economists call a "virtuos cycle" and the simple folk on Dalal Street call "a time to party". Also, note that I have used the word "threw" money into the market, not invested because these are statistics of traders, not of investoRs Traders and punters pay or collect the difference between their buy and sell prices every settlement. Investors invest for the longer haul and either end up with very expensive wall-paper when they make bad decisions or, if they make good decisions, end up with chandi and isonai: these days better known as Infy and Sify. But letís get back to the puzzle.

    So the net positions keep on rising from Rs 10 billion in May, 1999 (BSE-30 Index level of 3,400) to Rs 14 billion in July, 1999 (Index now at 4,100 levels) and then to Rs 30 billion by September, 1999 (Index is now nearing 5,000) and then there are all these fears of Y2K and the market sort of slips a bit and net positions decline to Rs 25 billion (Index at 4,500 to 4,800 range) as the traders, wary of foreign selling, move out of the market. But then, as December approaches, the Y2K fear seems to be declining in importance and the foreign flows into India increase to over US$ 370 million for December and the Index breaches the 5,000 mark - the net positions are now Rs 35 billion. By January 2000, the net positions are nearing Rs 40 billion and the Index had touched 5,500. By February, 2000 the outstanding positions had nearly touched Rs 50 bn (US$ 1.1 billion) and the Index was still near the 5,400 levels by month-end.

    And then we had the budget. The market fell into a free-fall of some sorts and the net outstanding positions shrunk by 15% or Rs 6 billion to Rs 36 billion Ė the Index fell about 10% to the 5,000 levels.

    Now here comes the puzzling part.
    Between April 4th an April 6th net outstanding positions have fallen by Rs 6 billion or 19% to Rs 26 billion and yet the BSE-30 Index has gone up by 3%. Even if you look at the Index from the day before the Nasdaq 30-minute bear market, the Index is down only 2% against a 19% decline in the outstanding positions.

    And FIIs have been fairly small net buyers of India stocks over the past few days with April 6 seeing a net purchase of US$ 12 m, as opposed to US$ 99 million the day before the fall in the Nasdaq.

    So, the punters are getting out. And the foreigners are not big buyeRs And mutual funds are facing redemption pressures so it is unlikely that they are buyers

    So, pray, Mr. Holmes, who is buying? And isnít it strange, Mr. Holmes, that in the past if net long positions increased, the market rose and if net long positions decreased (and neither did the FIIs pick up the slack) the market would fall, but now that relationship seems to have broken down? Oh, Mr Holmes, I have so many questions. But maybe I am looking at the wrong data. Back to the net again...

    Changes in Net Outstanding Positions influence the
    direction of the market...till now.
    Date Net
    Positions
    (Rs bn)
    Change
    over previous
    period (%)
    FII net
    buys
    (US$ m)
    BSE-30
    Index
    Change
    over previous
    period (%)
    May-99 10 na 400 3,964 na
    Jul-99 14 40.0% 347 4,598 16.0%
    Sep-99 30 114.0% (170) 4,733 3.0%
    Nov-99 25 -17.0% 283 4,622 -3.0%
    Dec-99 35 17.0% 372 5,006 8.0%
    Jan-00 40 14.0% 45 5,205 4.0%
    Feb-00 50 25.0% 708 5,446 5.0%
    Mar-00 36 -28.0% 275 5,018 -8.0%
    4-Apr-00 29 -20.0% 49 4,692 -7.0%
    5-Apr-00 28 -3.0% 24 4,757 -1.4%
    6-Apr-00 26 -7.0% 12 4,867 2.3%

     

     

    Equitymaster requests your view! Post a comment on "Net to Net.". Click here!

      
     

    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    Ankit Shah's First Five Insider Recommendations (The 5 Minute Wrapup)

    Aug 5, 2017

    How to get exclusive insider recommendations from Ankit Shah.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE IT


    Aug 16, 2017 (Close)

    S&P BSE IT 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS