The Crash( 17.5.2006) and FII activities since then

[pkjha30]

Hi

This is the FIIs derivatives activities for today

FII DERIVATIVES STATISTICS FOR 06-Jun-2006
------------------------- BUY-------------------------- SELL ----- EXCERCISED ---- ASSIGNED ---- OPEN INTEREST AT THE END OF THE DAY
------------ No. of contracts--- Amt in Crores------ No. of contracts--- Amt in Crores--- No. of contracts--- Amt in Crores--- No. of contracts--- Amt in Crores--- No. of contracts--- Amt in Crores
INDEX FUTURES--- 51184 ---1494.11--- 54272--- 1579.95 ---0 ---0.00--- 0 ---0.00 ---308756--- 8965.62
INDEX OPTIONS--- 3505 ---103.27--- 2098 ---63.46 ---0 ---0.00--- 0--- 0.00--- 67031 ---1968.90
STOCK FUTURES--- 9527--- 326.53--- 5574--- 210.10--- 0--- 0.00 ---0 ---0.00---- 345303--- 10972.97
STOCK OPTIONS--- 4--- 0.24--- 120--- 3.86 ---0--- 0.00--- 0--- 0.00--- 2099--- 89.62


What is noticed here is that The are net seller in index futures implying that the indices will be weak. On stock futures they are net buyers indicating positive outlook. However index futures is protected bu index options where they are net buyer. Clever strategy.

I would like some knowledgeable member to analyse and comment on this.

Pankaj

 

[pkjha30]

I dont think its possible... imagine if everyone knew what the other is buying or selling...its like giving a open book exam

czar

I think you are right as I could not lay hand on such info except in snatches.NSE and BSE are not giving that type of data, for obvious reasons

Pankaj

 

[pkjha30]

Hi

This is the summary findings on FII investments uptill dec 2004. Though outdated yet is quite relevant

Summary of Findings

1. The FIIs investments are highly concentrated in terms of their market value in a very small number of companies.

2. There seems to be a clear distinction in the FIIs shareholding in NIFTY and Non-NIFTY companies.

3. There is a wide gap between the actual investments by FIIs and the investments allowed as per the cap.

4. The gap in their investments exist both in NIFTY and Non-NIFTY companies.

5. The investments that may further be made in these 469 companies analysed is as high as Rs.2711 billion (works out to around US $ 60,244 million at an assumed rate of Rs.45/US$) which, when compared to the current figure of net equity investment of FIIs in all the companies through portfolio investment scheme as of September 2004 is Rs. 1115 billion, is very high..

6. When a model, with the FIIs investment as dependent variable and impact cost, market return, and the shareholding of non-promoters category of shareholders to total outstanding shares was tested with empirical data, it was found that impact cost and the quantum of shares available for trading in the market seem to be two important considerations for FIIs for their investment purposes. But of the two significant variables, impact cost has emerged as the most important variable explaining FIIs investment in a company.

The article can be accessed at
http://www.tapmi.org/paper1/ga.doc

It is an academic exercise. It contains one table that indicates that excep in 1999 FIIs are net investors. However during 2001 and 2002 their investment slowed and then only picked up in 2003.


If we remember correctly those were the priod of political uncertainty, 9/11 and NDA govt. initial years' policies.

Subsequently reforms picked up pace and in 2003 numbers of steps were taken which improved the investment climate resulting in increased FII inflow.


In terms of buy and sell FIIs are evenly matched for the year 2006. Political uncertainty is not there notwithstanding leftists hoarse cry , reforms are firmly inplace. Most importantly, it is not in doubt.

So what could be the factor leading to confidence building exercise:-

1. PSU disinvestment process to be accerlerated ( SAIL is a good target)
2.oil pricing mechanism to be streamlines as it is closely linked with inflation and profitability

3.capital account convertibility(doubtful or suicidal???)
4.Automatic route for FII/FDI sanctions
5. clarity on taxation( PC already chipped in)
6.FII in retail and yet to be opened sectors.
7.good corporate result season starting june 2006 last weak.(if bad GOD help us all)

May be others.

On global front

1. political problems in rival emerging markets
2.low interest rate( at least no hikes) by fed
3.strong dollers leading to more export to usa
4.lessening of liquidity concerns
5.latin america is almost out due to certain developments

we will see some but not all of these measures happening. Good or bad our indices will be critically dependent on FII inflows.

Pankaj

 

[pkjha30]

Hi

Nasdaq/^DJ inching up . in green

Tomorrow's story will be in green but no advice . Only wait and watch.

Pankaj

 

[pkjha30]

Hi

USA indices were in red finally. They are also unable to bear the bear onslaught. So our indices will be same as usual deep in red.

We will be shedding the entire flab acquired during secon half of 2005 and first half of 2006.

In such a volatile scenario , investors are advised to adopt a wait and watch policy.

Traderji has given an advice to pick strong/outperforming sectors and strong stocks within that sector could be good choice. One more criteia is that which had least fall. May be we should try to find stocks which fit this criteria. This advise is good for long term investment also.

Evidence of support will come only when FIIs resume explicit buying(under currents are already there). Global cues will be weak and uncertain in view of policies of various central banks.Smart money will flow to the direction of less risk and high return(meaning higher interest). I don't know if inflation will be controlled . But growth rate will slow down significantly if money is dear. So till a clear direction emerge, markets are likely to move in a range.

But once direction is clear move will be sharp. The only thing which can be assessed is if and when long term trend is broken. Incase it is not broken upmove will be sustantial as the kinetic energy of bounce will release the suppressed investor desire and propel the bounce higher.

On the other hand if trend is broken, the exit pressure will make market tumble down like nine pins. Unlikely but not impossible.

Wait and watch for investors.

Pankaj

 

[vinsu]

Hi ,
Just an update .
Our ouwn MF sold net 2,577 Rs m on 6th June .

Vinsu

 

[vinsu]

Hi

FII-MF:

FIIs net buy USD 18.9 million in equity on June 6
MFs net sell Rs 257.7 crore (Rs 2.57 billion) in equity on June 6
MFs net sell for 3rd day in a row
NSE F&O Open Interest down Rs 481 crore (Rs 4.81 billion) at Rs 26,299 crore (Rs 262.99 billion)

FIIs were net sellers Rs 74.48 cr in Nifty Futures on June 7
FIIs were net buyers to the tune of Rs 294.23 cr in stock futures on June 7
FIIswere net buyers to the tune of Rs 241.83 cr in F&O on June 7

From Rediff

Regards
Vinsu

 

[pkjha30]

Hi Vinsu

Yes undercurrents of buying is there. MFs will be facing pressure to meet their obligations . So they will be now selling what they got two years back. What they purchased during this bear run will be for keep for next two years. FIIs operation has already started. Even though I am highly tempted to say invest now, I would say hold back and let this phase of sell off by MF also taper off.

World sentiments are so negative that it would take some real good news to shake it off. OIL, INFLATION, GROWTH RATE, LIQUIDITY,POLICIES, GOOD CORPORATE EARNINGS would be the watch word.

Another point will be, in order to lure gullible investors people will talk of dividend etc. Same thing happened last time also.

My suggestion would be to follow the criteria given by Traderji and keep a list of stock ready to enter for investment.

As everybody is in shorting mood without ryhme and reason their time to become mincemeat has almost come. FIIs will squeeze last drop of blood and then let go as the returns from emerging market will still be better if growth continues.

Pankaj

 

[vinsu]

Rightly said Pankaj ..
Already the sensex recovered from the 500 point fall a bit . So this buying i dont think comes from the retail investor .

Staying on the sidelines still .

Vinsu

 

[pkjha30]

Hi All Members

At this stage when market is responding with ferocity and relicating each fall in the world market with more vigour and zeal, tradeji has suggested a retracement level up to 50% of previous upmove which started in june 2004.
That level is somewhere around 8580. So expect the worst and be ready to pickup pieces to rebuild again.

The twin towers were lost because weigth of the falling debris and heat became too much for the foundation to withstand. With every fall in indices sentiments wil take a plunge and people sitting on the sideline would try to exit as it becomes mass exodus. That is when FIIs and others will speed up tha pace. The moves next week will decide whether Long Term remains or goes for a toss.

But be sure, a great buying opportunity is on the way , don't let it go, since nothing else will change in the economy. Interest rates will keep fluctuating. Inflation will be there. companies will continue to do their work. oil prices will go up yet vehicle movement/transport will not stop. People would continue to work. Money will keep moving from market to market. As long as market reflects the economic growth there is no cause for worry. But if it fails , it will risk marginalisation meaning long term bear market. However that possiblity is not yet there.

If members followed the discipline of trading and investing they would weather this crisis also and any crisis in future as well. This itself is enough to protect you form vagaries of the market.

Before we see any substantial up move , world sentiments need improvement.
FIIs will gather their pace of buying when last lot of beneficiaries of great bull run rush to market to offload in a mass exodus. That is what we have to keep watch and pick up pieces to rebuild again.

May God bless you all

Pankaj