FII buying may resume at D-St: study

FII buying may resume at D-St: study
The Financial Express, April 7, 2009, Page 2

In what could be a good news for market, the foreign institutional investors are likely to get into a strong buying mode in the coming days that may lead to a rally on the Dalal Street, a study says.

"The rise in confidence level simultaneously with high level of cash with High Networth Individuals, FIIs and Domestic Institutional Investors (DIIs) could create a situation where buying could be more serious than selling in coming days," capital market research firm CNI Research report stated.

According to the analysis by the research firm, there exists a direct co-relation between FII buying and selling and the movement of the domestic stock market.

The report revealed that in the last 15 months, when major selling by FIIs took place, the stock market had crashed vertically.

Similarly, FII buying was visible in the months in which the Nifty and the Sensex had closed in positive zone.

After witnessing the continuous selling by FIIs, the stock market is now seeing some inflows which may lead to an upward movement for the stock market.

Before March, the FIIs were sellers and only after March 17, the flows started becoming positive (huge selling had started from FIIs from January 21, 2008). FIIs have been net buyers in equities worth Rs 2,368.3 crore in last two weeks of March.

According to the net positions of FII from January 2008 to March 31, 2009, their selling and buying were directly linked to the movement of the benchmark indices — the Bombay Stock Exchange's Sensex and the National Stock Exchange's Nifty.

The highest selling by the FIIs of USD 3.80 billion was in October, 2008 when the Sensex had dropped 41 per cent, while the Nifty fell by 42.55 per cent.

The major selling happened in the months of January, May, June, September, October 2008 and January 2009. In these six months selling was almost USD 14 billion.

The study revealed that the only four months in the reviewed period in which the FIIs net positions were positive include --February (inflow of 725 USD million), April (USD 266.2 million), December (USD 433 million) and March, 2009 (USD 247 million).

In the same months, Sensex and Nifty had also closed in the positive territory.

Bureau Report "From the last two weeks there are positive trends from FIIs and one should expect the upward movement of market," the research report stated.