FIIs - Boon or Bane

We have time and again heard business news channels blaming FIIs for every ‘massive’ selling which our Indian stock markets have to bear.

It’s analogous to ISI having a ‘hand’ in all terror activities taking place in India.

Though, I’ll not comment on the latter point, let me share my views on the former.

• From the beginning of this calendar year, we have had 166 trading days (including Aug 30, 2011) across the last 8 months.

• On Jan 3, 2011, Nifty opened at 6,177.45 and on Aug 30, 200 it closed at 5,001.00.

• Year to Date (YTD), the Nifty has lost 18.08% (if not for the 2 days of fantastic recovery, the loss was 22.23%)

• Out of the 166 trading days, the Nifty closed lower than the previous day on 93 days (56% of the trading days)

o On these 56% days, a trading day closed anywhere between -0.01% to -3.32% over the previous trading day

o Out of the 44% days, a trading day closed anywhere between +0.01% to +3.49% over the previous trading day

• Domestic Institutional Investors (DIIs - Banks, DFIs, Insurance and MFs and New Pension System) have been net buyers in 5 out of the last 8 months.

• FIIs (Foreign Institutional Investors) have been net buyers in 4 out of the last 8 months

• The biggest surprise

o DIIs have been net buyers to the tune of Rs. 22,594 crores

o FIIs have been net sellers to the tune of Rs. 16,446 crores

o Net-Net, there was more money put in the market than what was taken out in the last 8 months

If I consider the opening level of Nifty on the first trade day of a month vis-à-vis the closing level of Nifty on the last trade day of a month

• Only in 2 months (March & June) was the net level of Nifty in the positive

• Combined trades of FIIs & DIIs, months in which they were net buy were Mar, May, Jun, Jul

• Only in 1 month (March) were FIIs and DIIs on the same side in terms of market position (Net Buyers)

• All other months either FIIs have been net buyers / net sellers while DIIs have been net sellers / net buyers

We continue to be driven by what ‘West’, ‘Westerners’ do, either directly or indirectly.

This has been for the “good, bad, ugly” for our culture (past, present, future), economic policies, financial markets and anywhere else where we can see its influence.

• DIIs have shown confidence in our own markets, so should retail investors

• India is the 3rd fastest country (as per GDP growth rates for Q 1 – FY 2011-12) in the world today even at 7.7%

• Our country is more internal consumption driven than other developed markets

• India will be an economic super power sooner than later.

• When FIIs sell – BUY; when they buy – SELL

• FIIs will always pull out their money as and when they make profits

• Avoid stocks where FIIs holding is significant