FIIs turn net-sellers in April

FIIs turn net-sellers in April

After 10 months of constant buying in the Indian equity market, foreign institutional investors have suddenly turned net sellers during April, spooking the stock market and driving the indices lower.

FIIs sold equity worth Rs 15,434.60 crore during the month till April 28 while making gross purchases to the tune of Rs 15,105.70 crore, thus making net sales of Rs 328.90 crore.

The equity sales in April follow two months of aggressive buying by FIIs. They were buyers to the tune of Rs 7,502.20 crore in March and a whopping Rs 8,376.30 crore in February, the largest net investment in a single month during the past fiscal.

Market sources attribute the drop in indices to slowdown in FII inflows and lack of serious buying activity owing to lower-than-expected quarterly and annual results by several leading companies.

Some of the short-term traders like hedge funds among the foreign investor community made an exit, probably on indications of an interest rate hike in the US market, said an official at a broking house, and some of the corporate results too have been below expectations. However, the India story for FIIs is still far from being over, he added.

Owing to the sales pressed by both FII and local investors, the benchmark indices BSEs 30-stock Sensex and NSEs 50-stock Nifty have also tripped during the month. While the Sensex fell a whopping 450 points during the month from 6605.04 on April 1 to 6154.44 on April 29, the Nifty came down by 165 points, from 2067.65 on April 1 to 1902.50 on April 29.

Market sources point out that the FIIs were net sellers to the tune of Rs 574.40 crore in equity on April 15 when the Sensex tumbled by 91 points and Nifty fell over 28 points. FIIs were again net sellers to the tune of Rs 456.70 crore on April 18 when the Sensex fell another 22 points and the Nifty came down by over 18 points.

The slowdown in FII inflows has caught several thousands investors on the wrong foot, with each fall in the benchmark indices bringing down investors wealth by several thousands crore.

The domestic fund managers seem unperturbed by the sales pressed by FIIs and have been buying in the market at every opportunity. Mutual funds mopped up equity worth Rs 4041.75 crore during the month till April 28, pressing sales worth Rs 2613.78 crore, thus making net purchases to the tune of Rs 1427.97 crore.

The quantum of net equity sales made by the FIIs is not a significant amount currently, looking at the size of net investments. There is certainly no defined trend that the FIIs are moving out, says UTIs senior vice-president (fund management) Amandeep Chopra.

Local investors, says Chopra, seem to lack conviction in the market with such volatility. For some stocks, the valuations have turned comfortable, he adds.

The FIIs had pumped in close to $10-billion in the Indian equity market during fiscal 2004-05, over 12 per cent rise in dollar terms. Their net investment in equity market was to the tune of Rs 44,121.40 crore during 2004-05 as against Rs 39,958.90 in fiscal 2003-04.

FIIs had dumped equity worth a whopping Rs 3,246.90 crore during May 2004, when there was a change of government at the Centre.

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