$17.24 billion = $6.5 billion.
Mathematics would declare the hypothesis false, but in the quirky world of stock markets, it rings plain dead right.
Trend underscores lopsided impact of foreign money
MUMBAI: $17.24 billion = $6.5 billion.
Mathematics would declare the hypothesis false, but in the quirky world of stock markets, it rings plain dead right.
By selling shares worth $6.5 billion in the last six months, FIIs have nullified the gains created by their equity purchases worth $17 billion over twice that time in 2007.
Foreign institutional investors (FIIs) pumped in Rs 72,706 crore to take the Sensex from 13786 at the end of the year 2006 to 20286 on December 31, 2007. That was a gain of 6500 points.
As the euphoric ride bubbled, it entrapped the traditional suckers —- the retail investors —- and also enticed domestic institutions in hordes.
Riding on this top-up effect, the combined market capitalisation of companies on the Bombay Stock Exchange doubled to over Rs 71 lakh crore in 2007. So much so, for every Rs 1 crore invested by FIIs, the market cap went up by Rs 49 crore.
Cut to right now.
In the last six months, FIIs have sold just over a third of what they bought in 2007.
But Sensex has lost 6761 points as they jettisoned shares worth Rs 28,109 crore, plunging from 20286 to 13525.
R Balakrisnan, executive director, Centrum Broking, says this clearly bares the local market’s continued dependence on foreign investors.
“The lack of buying capacity of domestic players is on full display. That way we are a very small market and with retail players virtually out since January, FIIs hold our market to ransom.”
For every point that the Sensex has fallen, FIIs needed to sell only Rs 4 crore worth of shares. In contrast for every point the index rose, they had to pump Rs 11 crore.
Experts feel with better options available around the globe, the return of FIIs is something nobody can bet on.
Says Amar Ambani, vice-president, research, India Infoline: “I don’t see them coming back soon. They have better options outside.”
Balakrishnan concurs: “Globally asset allocation towards India has been reducing. So yes, they may not come back in a hurry.”
n_subramanian@dnaindia.net
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