Oct 22, 1999|
FIIs have been big sellers in October
According to figures released by the Securities and Exchange Board of India (Sebi), there has been a net outflow of US$ 100 m during the month of October. This disclosure brings to light that the current sell off in the market has financial institutional investors (FIIs) participating in a major way.
With yesterday's fall of 2.1%, the BSE Sensex (30 share) has witnessed an erosion of over 50% of its post poll gains. Traders have attributed the sell off to two main factors:
Reshuffling of portfolios by institutions in order to focus on cyclical stocks that are likely to benefit more as a result of the economic recovery.
Information technology stocks are likely to witness a slowdown in earnings as companies defer purchases to the new year (after the Y2K deadline). IBM, an international information technology giant, has warned analysts that the company is likely to miss earnings estimates due to the same reason.
A fall in prices of infotech stocks, primarily Infosys, Satyam Computers, Pentafour software and Digital contributed to the decline in the market indices. However, by the end of the day, as pessimism spread, most stocks had witnessed a sharp erosion in market capitalisation.
For the sentiment to improve, the flow of FII money will have to be reversed. However, given the increasing uncertainity pertaining to Y2K preparedness in India, it may be a while before we see the FIIs back in full force.
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