Jun 10, 2000|
FIIs, Punters Divided opinion
The Sebi's record of net purchases by foreign investors has been showing an interesting trend in recent days. So have the carry forward positions in the market. What to make of it?
From the above charts one thing is clear. The FIIs have been quick to build positions in the market. Infact, the momentum investors, for once, were not ahead of other market forces (the FIIs) in determining a change of sentiment on the bourses. The result was an extended rally, first led by FIIs and then by momentum investors. The Sensex has risen by 16% over the last two weeks. However, as can be noticed from the chart depicting FII net inflows, in the last three sessions, FIIs turned net sellers to the extent of Rs 1.5 bn.
Another development in the markets has been the rise in carry forward charges on both the BSE (Badla) and NSE (ALBM). In the first instance, the BSE witnessed a 100% jump in charges to 12%. In the subsequent week, under the NSEs ALBM, mean rates rose to over 22%, underscoring the surge in buying sentiment among momentum investors. The fear of higher carry forward charges and probably the persistent sales by FIIs led momentum investors to ease their buying spree towards the end of the period under consideration. Nevertheless, net outstanding positions increased from Rs 17.7 bn on last Friday to Rs 21.3 bn at the end of this week.
The recent change of sentiment by FIIs has probably yet to affect market sentiment, as the numbers involved are still small (they were net sellers in four of the five trading sessions this last week). However in view of the rising rates in US and depreciation in the value of Rupee, FIIs have a reason to scale back their exposure to Indian markets. Then there is the issue of the NASDAQ taking another beating. Mark Mobius, of Templeton Mutual Fund, recently stated that he expects NASDAQ to decline to 2,500. It is currently at 3,875, after having declined form a high of 5,300. If this were to turn out, US investors would begin to pull out their money from funds (domestic and international) in the hope of preserving their capital and booking whatever profits they can (of course there will be contraraians). This would limit the pool of investible resources available to FIIs, hurting investor sentiment.
The situation is definitely interesting. The FIIs are on the selling side. The momentum investors have been building positions (until the FIIs turned net sellers). What to expect? That both categories of investors will continue to move in opposite directions is unlikely. Infact momentum investors seem to have already begun to respond to the FIIs sales.
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