The Crash( 17.5.2006) and FII activities since then
- Thread starter pkjha30
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Hi Ahmed
This may be one of the factors now, but then there are so many other factors as well. Movement of Indices/Stocks on the basis of FII buy and sell activities has been somewhat akin to conspiracy theory as some of wise members have pointed out in many posts.I , though , beg to differ to the extent that given the level of their investment, their need to cover their losses in USA or other markets , need to take income home etc their buy and sell activities will always have significant impact on movement of Indices.They need not conspire for this. The situation is much more complex now since they are permitted to short sell so they enjoy both ways thanks to Damodaran.
USA election will take its own toll on world market and analysts are saying (incl investor Buffet) that USA is somewhat into the recession. This being pre election year for India as well market will behave very nervously. The uncertainty has its impact on indices. So good news would be limited to earnings data from Companies.
As for data FIIs are in net sell of approx Rs. 12832 Crore from Jan to March 2008.
On total investment basis, it has crossed Rs. 270635.80 crores(2008). Last year this figure was 283468.40 (2007) so it is reflecting net sell of 12832 crores.
Corresponding figure for 2006 was 211981.90 crores.However their total sell in 2007 upto May was Rs 7345.80 crores on net investment of Rs 186572.70 crores. So in percentage terms it compares well till date.
If one notices continuing Net sell by FIIs then we may see levels below 15500 or so which is where market had recorded lowest intraday fall in January. For last four months they are in net sell and I am yet to notice any more inflow except their sectoral rotation.
Basically, FIIs have entered into market at the levels achieved during May 2006 From there sensex has gained about 100% despite this fall. I think market will drift between 15500-19500 before it starts next journey for 25000-26000. This will be achieved within 12-18 months from now (still it is not 100%).
I don't think India story is over or will be over by next election. My views expressed earlier in this thread remains same. In fact this is a golden opportunity for Long Term "Traders" ( as endoresed by SAINT as well
and what I call investors) to get into India Growth story.
At some point technicals will have to reflect oversold positions, low PEs and stocks trading at low multiples of PE or PB. But still one has to be wary of mid/sml cap stocks which have a tendency to shoot up during last leg of bull run and languish thereafter. Its is good time to get into those sectors and large cap companies which are faring well.
As for my portfolio, in last fall my profit was taken out by the fall, this year it has not yet happened despite the fall so I don't feel stupid and there is a wide margin before I feel stupid as investor. My targets are limited and miserable and compares well to Bank interest rates for fixed deposits. I donot consider myself as trader so I don't sell so easily or rely much on stop losses.And I don't buy also that easily inspite of all the hype given by CNBC and topersters in the forum which proliferate during last leg of bull run as always.
But then I am not an Ideal investor either and should not be emulated.
pankaj
This may be one of the factors now, but then there are so many other factors as well. Movement of Indices/Stocks on the basis of FII buy and sell activities has been somewhat akin to conspiracy theory as some of wise members have pointed out in many posts.I , though , beg to differ to the extent that given the level of their investment, their need to cover their losses in USA or other markets , need to take income home etc their buy and sell activities will always have significant impact on movement of Indices.They need not conspire for this. The situation is much more complex now since they are permitted to short sell so they enjoy both ways thanks to Damodaran.
USA election will take its own toll on world market and analysts are saying (incl investor Buffet) that USA is somewhat into the recession. This being pre election year for India as well market will behave very nervously. The uncertainty has its impact on indices. So good news would be limited to earnings data from Companies.
As for data FIIs are in net sell of approx Rs. 12832 Crore from Jan to March 2008.
On total investment basis, it has crossed Rs. 270635.80 crores(2008). Last year this figure was 283468.40 (2007) so it is reflecting net sell of 12832 crores.
Corresponding figure for 2006 was 211981.90 crores.However their total sell in 2007 upto May was Rs 7345.80 crores on net investment of Rs 186572.70 crores. So in percentage terms it compares well till date.
If one notices continuing Net sell by FIIs then we may see levels below 15500 or so which is where market had recorded lowest intraday fall in January. For last four months they are in net sell and I am yet to notice any more inflow except their sectoral rotation.
Basically, FIIs have entered into market at the levels achieved during May 2006 From there sensex has gained about 100% despite this fall. I think market will drift between 15500-19500 before it starts next journey for 25000-26000. This will be achieved within 12-18 months from now (still it is not 100%).
I don't think India story is over or will be over by next election. My views expressed earlier in this thread remains same. In fact this is a golden opportunity for Long Term "Traders" ( as endoresed by SAINT as well
and what I call investors) to get into India Growth story.At some point technicals will have to reflect oversold positions, low PEs and stocks trading at low multiples of PE or PB. But still one has to be wary of mid/sml cap stocks which have a tendency to shoot up during last leg of bull run and languish thereafter. Its is good time to get into those sectors and large cap companies which are faring well.
As for my portfolio, in last fall my profit was taken out by the fall, this year it has not yet happened despite the fall so I don't feel stupid and there is a wide margin before I feel stupid as investor. My targets are limited and miserable and compares well to Bank interest rates for fixed deposits. I donot consider myself as trader so I don't sell so easily or rely much on stop losses.And I don't buy also that easily inspite of all the hype given by CNBC and topersters in the forum which proliferate during last leg of bull run as always.
But then I am not an Ideal investor either and should not be emulated.
pankaj
Here is moneytoday article on this topic about a month old appears to be relevant:
"Why you shouldn't follow FIIs
Narayan Krishnamurthy
February 5, 2008
Foreign institutional investors or FIIs are companies registered outside India, entering the domestic financial markets. These FIIs include hedge funds, pension funds and mutual funds. Any investment by an FII is generally in millions of dollars, which raises the inevitable question: what do FII movements and investments have to do with the small investor, who invests, at the most, a few lakhs of rupees?
Take a look at this: in the past 49 months there has been more than $41 trillion worth of FII funds invested in India. This has aided the recent bull run, and the market has seen unprecedented growth with the BSE Sensex rising 221% in absolute terms in this span. Obviously, investments by FIIs matters to the market, which then affects us.
A look at FII investment in January, then, tells a dismal story. Between 16 and 24 January, some $3.6 billion was taken out by FIIs. What’s most important is how this net selling affects us as retail investors. Should we take our cue from these investors and exit the market now? Economist Surjit S. Bhalla says no.
Concurs Tridib Pathak, CIO, Lotus India Mutual Fund: “There is a lot of value in this market and fundamentally, there is a lot of upside in it. For long-term value investors, there’s little cause for worry.” Adds Nilesh Jasani, research analyst, Credit Suisse: “Investors should remain invested in sectors where underlying earnings growth has little to do with financial markets or global economy.” However, as any market strategist will tell you, it’s always good to keep an eye on what the big movers are doing.
So, why are the FIIs turning sellers? There are several reasons given for this flight, but there are three predominant factors that are cited as being largely responsible. We take a look.
Re-rating India
The swings in the market forced several FIIs to withdraw from India and park their dollars in other emerging markets. Most of those fleeing India have shifted their attention to Uruguay, Russia, the Ukraine, and several other former Soviet countries.
Though there have been swings in the past too—July and October 2007 being the recent ones—FII response this time was different because of margin pressures back home. Most analysts say many FIIs have a mandate to provide regular returns to their investors. The Indian markets are not seen as a good short-term bet any more. India is seen as a good investment for the medium to long term. That’s because, despite its recent dismal performance, India has outperformed most Asian markets (excluding Indonesia and Malaysia), says a Deutsche Bank report.
Fear of earnings slowdown
Analysts dismiss this fear in light of corporate India’s third quarter results. However, FIIs seem to fear the pace of growth and the fundamentals of the markets. Most FIIs are looking at corporate governance and execution abilities, which could be significant drivers in creating a strong portfolio of Indian stocks.
Recent action taken by the market regulator indicates that the Indian government would like to moderate the inflow of FII money. Again, these are fears of only a few FIIs, as average FII redemptions in India have been lower than in other Asian economies. Rather than a wholesale FII exit, analysts suggest that these institutions are just becoming choosy.
“Valuations are very attractive on a selective basis, and stock picking has to be done based on evaluation of business fundamentals,” says S Naren, senior vice-president and head of equities, ICICI Prudential.
Fear of a global slowdown
The subprime issue and problems in the credit markets have raised concerns about potential growth slowdown in the US and Europe.
The fear of a slowdown will likely continue to weigh on markets and stocks. “The Indian economy has sufficient internal ballast so that it won’t be blown off course, but it will lose some momentum,” says Jasani. This matters to FIIs who are investing billions of dollars. For the retail investor, however, a recession in the US will not really make a difference.
Exports account for 13% of India’s GDP, with only 15% of this going to the US. Clearly, some USexposed export sectors such as IT services and textiles will live in the shadow of a slowdown in the US. Nevertheless, India’s overall export intensity is among the lowest in the region. Says Sukumar Rajah, CIO, Franklin Equity: “India is among the economies less sensitive to a deceleration in US growth and one should not be perturbed by FII flows in either direction.” Some analysts also feel that a US slowdown may in fact increase outsourcing to India. All this apart, a global economic turmoil will make stock markets nervous time to time."
"Why you shouldn't follow FIIs
Narayan Krishnamurthy
February 5, 2008
Foreign institutional investors or FIIs are companies registered outside India, entering the domestic financial markets. These FIIs include hedge funds, pension funds and mutual funds. Any investment by an FII is generally in millions of dollars, which raises the inevitable question: what do FII movements and investments have to do with the small investor, who invests, at the most, a few lakhs of rupees?
Take a look at this: in the past 49 months there has been more than $41 trillion worth of FII funds invested in India. This has aided the recent bull run, and the market has seen unprecedented growth with the BSE Sensex rising 221% in absolute terms in this span. Obviously, investments by FIIs matters to the market, which then affects us.
A look at FII investment in January, then, tells a dismal story. Between 16 and 24 January, some $3.6 billion was taken out by FIIs. What’s most important is how this net selling affects us as retail investors. Should we take our cue from these investors and exit the market now? Economist Surjit S. Bhalla says no.
Concurs Tridib Pathak, CIO, Lotus India Mutual Fund: “There is a lot of value in this market and fundamentally, there is a lot of upside in it. For long-term value investors, there’s little cause for worry.” Adds Nilesh Jasani, research analyst, Credit Suisse: “Investors should remain invested in sectors where underlying earnings growth has little to do with financial markets or global economy.” However, as any market strategist will tell you, it’s always good to keep an eye on what the big movers are doing.
So, why are the FIIs turning sellers? There are several reasons given for this flight, but there are three predominant factors that are cited as being largely responsible. We take a look.
Re-rating India
The swings in the market forced several FIIs to withdraw from India and park their dollars in other emerging markets. Most of those fleeing India have shifted their attention to Uruguay, Russia, the Ukraine, and several other former Soviet countries.
Though there have been swings in the past too—July and October 2007 being the recent ones—FII response this time was different because of margin pressures back home. Most analysts say many FIIs have a mandate to provide regular returns to their investors. The Indian markets are not seen as a good short-term bet any more. India is seen as a good investment for the medium to long term. That’s because, despite its recent dismal performance, India has outperformed most Asian markets (excluding Indonesia and Malaysia), says a Deutsche Bank report.
Fear of earnings slowdown
Analysts dismiss this fear in light of corporate India’s third quarter results. However, FIIs seem to fear the pace of growth and the fundamentals of the markets. Most FIIs are looking at corporate governance and execution abilities, which could be significant drivers in creating a strong portfolio of Indian stocks.
Recent action taken by the market regulator indicates that the Indian government would like to moderate the inflow of FII money. Again, these are fears of only a few FIIs, as average FII redemptions in India have been lower than in other Asian economies. Rather than a wholesale FII exit, analysts suggest that these institutions are just becoming choosy.
“Valuations are very attractive on a selective basis, and stock picking has to be done based on evaluation of business fundamentals,” says S Naren, senior vice-president and head of equities, ICICI Prudential.
Fear of a global slowdown
The subprime issue and problems in the credit markets have raised concerns about potential growth slowdown in the US and Europe.
The fear of a slowdown will likely continue to weigh on markets and stocks. “The Indian economy has sufficient internal ballast so that it won’t be blown off course, but it will lose some momentum,” says Jasani. This matters to FIIs who are investing billions of dollars. For the retail investor, however, a recession in the US will not really make a difference.
Exports account for 13% of India’s GDP, with only 15% of this going to the US. Clearly, some USexposed export sectors such as IT services and textiles will live in the shadow of a slowdown in the US. Nevertheless, India’s overall export intensity is among the lowest in the region. Says Sukumar Rajah, CIO, Franklin Equity: “India is among the economies less sensitive to a deceleration in US growth and one should not be perturbed by FII flows in either direction.” Some analysts also feel that a US slowdown may in fact increase outsourcing to India. All this apart, a global economic turmoil will make stock markets nervous time to time."
One should go by analysts' advice with a pinch of salt. When they say "Valuations are very attractive on a selective basis, and stock picking has to be done based on evaluation of business fundamentals", what they mean nothing but words and jargons. It has no substance. initially I used to read a lot on money control and watch CNBC analysts and believe me, it is a losing proposition. After all its not their money but your's at stake.
One invests to see the price appreciation which depends on many factors. Trader would be trading in both direction and can make money in Bear market, but investors can't make money as value of investment will always go down so one has to wait for uptrend to be confirmed. this could be different for different time horizon. Collective buy and sell affects market and its sentiments. FII does form a major chunk of this so their action is significant. What I find is that they are not exiting as such. When retail and individual investors are exiting due to poor sentiments, they buy.
So if long term story is intact or secular bull run is intact then it makes sense to keep track of them else their will be no end to nightmares.
Pankaj
One invests to see the price appreciation which depends on many factors. Trader would be trading in both direction and can make money in Bear market, but investors can't make money as value of investment will always go down so one has to wait for uptrend to be confirmed. this could be different for different time horizon. Collective buy and sell affects market and its sentiments. FII does form a major chunk of this so their action is significant. What I find is that they are not exiting as such. When retail and individual investors are exiting due to poor sentiments, they buy.
So if long term story is intact or secular bull run is intact then it makes sense to keep track of them else their will be no end to nightmares.
Pankaj
C
Hello Dada, one thing I heard today on being asked to a m.fund guy on cartoon network as to why there are no buy figures when then are sitting on lot of cash ? he replied that they are buying in futures as they are at a considerable discount than cash, so why are there no future figures for DIIs ???? do you or anyone knows about this ???
PS: I think you should remove the date from the title & make it a general "The Crash" thread
PS: I think you should remove the date from the title & make it a general "The Crash" thread
Hi rangrajan
I did not say I am not an investor. I try to stay invested as much as possible. There may not be much buying and selling activity par se unless I have surplus cash or I need money. Certainly long term investments is what I aim for , so to get into a stock, it has to have really good fundamentals and growth prospects. Such crashes do provide opportunity to get in. I don't see much opportunity when market was already peaking and most tipsters start posting.
What I said in previous post is that I am not an Ideal Investor.
Hope this clarifies the hair splitting part.
pankaj
I did not say I am not an investor. I try to stay invested as much as possible. There may not be much buying and selling activity par se unless I have surplus cash or I need money. Certainly long term investments is what I aim for , so to get into a stock, it has to have really good fundamentals and growth prospects. Such crashes do provide opportunity to get in. I don't see much opportunity when market was already peaking and most tipsters start posting.
What I said in previous post is that I am not an Ideal Investor.
Hope this clarifies the hair splitting part.
pankaj
Hello Dada, one thing I heard today on being asked to a m.fund guy on cartoon network as to why there are no buy figures when then are sitting on lot of cash ? he replied that they are buying in futures as they are at a considerable discount than cash, so why are there no future figures for DIIs ???? do you or anyone knows about this ???
PS: I think you should remove the date from the title & make it a general "The Crash" thread
PS: I think you should remove the date from the title & make it a general "The Crash" thread
I do not intend to write in this thread as it was meant for May 2006.But some reply was intended. At that time in 2006 I saw lot of distress and pain in members despite good advice being available. They had fallen prey to tipsters when what one need is to trade/invest with a clear idea and stop losses so as to avoid loss.
I fully agree with you on not providing enough data of FII/DII futures activities by exchanges. I feel NSE/BSE/SEBI must do something in this direction to really give information to retail investors and traders before they make buy/sell decisions. It may surprise us how positive they are on Indian Market when it comes to futures. Some articles did point to this. (being negative when it was peaking and now positive when it is down in the dumps for rest of us
)Pankaj
ps:- well depends if someone undertakes to carry on writing into this thread.
Hi Czar
I do not intend to write in this thread as it was meant for May 2006.But some reply was intended. At that time in 2006 I saw lot of distress and pain in members despite good advice being available. They had fallen prey to tipsters when what one need is to trade/invest with a clear idea and stop losses so as to avoid loss.
I fully agree with you on not providing enough data of FII/DII futures activities by exchanges. I feel NSE/BSE/SEBI must do something in this direction to really give information to retail investors and traders before they make buy/sell decisions. It may surprise us how positive they are on Indian Market when it comes to futures. Some articles did point to this. (being negative when it was peaking and now positive when it is down in the dumps for rest of us )
Pankaj
ps:- well depends if someone undertakes to carry on writing into this thread.
I do not intend to write in this thread as it was meant for May 2006.But some reply was intended. At that time in 2006 I saw lot of distress and pain in members despite good advice being available. They had fallen prey to tipsters when what one need is to trade/invest with a clear idea and stop losses so as to avoid loss.
I fully agree with you on not providing enough data of FII/DII futures activities by exchanges. I feel NSE/BSE/SEBI must do something in this direction to really give information to retail investors and traders before they make buy/sell decisions. It may surprise us how positive they are on Indian Market when it comes to futures. Some articles did point to this. (being negative when it was peaking and now positive when it is down in the dumps for rest of us
)Pankaj
ps:- well depends if someone undertakes to carry on writing into this thread.
good to see this thread is active After long again.
Now morgan stenly set the targate for sensex 11021. wat do u think abt. it.
Ahmed
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