karthikmarar said:
Hi PK
Some statstics....
FII equity investment data for the month of May
purchase - 47728 Cr.
Sales - 55082 Cr.
Net Investment : - 7454 Cr.
In MAY the net outstanding investments ( Buy-Sell) is -1630 Million US $
Total outstanding net investments so far 43585 Million UD $
Actually the MAY pullout works out to a mere 3.7% of the total outstanding investment.
This is what I am telling for the benefit of those who think it is a start of bear market. It is quite insignificant.
What worries us is the speed with which it was pulled out. Big offloading is enough to drag indices lower. We all know that.My question is why they are still investing and still remain invested. The answer may not be easy. But as Amit said once It may be smart money moving in and moving out of the market with usual swiftness. If smart money is getting advantage of double taxation benefit or long term capital gains tax. Both somehow appears unlikely. Smart money can not have LTCG. Mauritius route benefit will have to be analysed in detail.
Ultimately I think our market has not yet attained that depth required to cushion this type of withdrawal.
So they have taken less than 4% of their Total investments. This raises many questions
- Is pulling out 4% of the total investments is a big crime. Soo much noise we are making. Orisit only the modus operandi that cpuld be blamed.
- If pulling out 3% can create such havoc, imagine if they pullout ..say 20%. Ohhh imagine the power they have over our markets..
- Should the RBI restrict the percentage of FII holding in the companies to just the initial 24%. Have we sold outselves to the FII. We shot ourselves in the foot and now crying Hoarse.
No karthik , I don't think it is a crime. It is part of the well known strategy of FIIs and Smart money perticularly hedge funds. That is their mandate secured by law. The also need to earn money show returns etc. But if they go for F7N shorting then it doesnot gel with the Idea of Investment. This needs to be stopped. Czar will not be standing in front of the queue for the job as Govt. will ask him to give consultation on how to catch shortsellers on downticks.
Due to lack of depth they have this power. The answer is to increase the depth. But in any case there is no escape from cyclical nature of market. Regulation or no regulation.
Furthermore , reducing or increasing mindlessly FII limit without any concrete policy objective is going to serve no purpose. Nor will it be done that way.
One has to acknowledge that FDI and FIIs have put a premium on good companies, induced them to adopt corporate culture. Look even birlas now pretend to be corporate.It forces quality parameters, production and marketing effeciency. Many of the terms we were not knowing like SCM , ERP Corporate Governance etc have been brought by them. Now it is usual to see CEO or MD to hold press conference and give details about their earnings and future plans. It also makes them responsible to some extent. That has to extend to the shareowning public or retail investors like in western countries.
If nothing is wrong in FIIs investment and pulling out money(why they are not pulling out 20%..a puzzle) then it is still not a bear market. They do have power to influence the market and this could be one indicator signalling turnaround in the sentiments and ultimately. Let me be over optimistic to say that next rise of nifty will surprise by year end.
But ordinary investors don't hold the key as of now. So wait and watch.
Hope this is okay with you
Regards
Pankaj