• MAY 10, 2000

Foreign investors - A dramatic change of sentiment

Volatility in the markets was high as usual the other day. Given the fact that it was the last day of the closing settlement on National Stock Exchange (NSE) a little more than usual volatility was rightly anticipated. However, now the volatility seems more ominous.

According to Securities and Exchange Board of India (Sebi), foreign investor were BIG sellers the other day. Net sales amounted to Rs 4.44 bn, highest in recent months. What led to this sell-off? Probably redemption pressures from nervous investors abroad. Or simply profit booking after the sharp run up last week.

As is evident from the chart, FIIs have been large investors in the domestic markets in recent months. An investment opportunity in technology stocks and attractive valuations in old economy stocks led the buying interest. Now, however, with the technology stocks having taken a battering the sentiment seems to be tapering down. Old economy stocks have also failed to live up to expectations in terms of returns. FII investments are usually very fickle. Probably they may turn big buyers today. Or tomorrow. But the underlying message of uncertainty is clearly brought out by this volatility.

Read Equitymaster’s study on FII investments in India

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