Foreign investors faced flak for pulling down the domestic stock market deep into the red over the past one month. However, a little bit of data crunching shows that foreign institutional investors are not guilty as charged.
FIIs have actually stepped up their buying into local stocks during the fall of 1,839 points in the Bombay Stock Exchange's benchmark Sensex over the past one month, as compared to the period the index gained by a similar quantity. The barometer index lost 164 points on Friday to settle at 12,884.99 points, representing a steep fall from its peak of 14,724 scaled exactly one month ago on February 9.
However, an analysis of FII activity over this period shows that FIIs have made an average daily net purchase of shares worth $35 million since the downfall began last month. In contrast, the average daily net inflow from FIIs was lower at $30 million during the close to four-month upward journey of Sensex, which gained those 1,839 points it lost in the current downslide.
Before the current downtrend began, the Sensex was last trading close to its current levels on October 17, when it had settled at 12,883 points. FIIs had made net purchase of close to $3 billion (Rs 13,400 crore) between October 17 and February 9, while they have been net buyers of about $700 million (Rs 3,100 crore) during the past one month.
According to the market experts, it has been the sentiments, rather than the actual numbers, that hit the bourses and stripped off an estimated $8 billion (Rs 36,000 crore) from the total investor wealth put into domestic bourses in just a month.
The exodus of funds worth over $10 billion from the emerging market funds worldwide and a decline in the total number of FIIs in the country have added to the bearish investor sentiments, they believe.
According to the emerging market fund tracking firm EPFR (Emerging Portfolio Fund Research), a record $8.9 billion was withdrawn from emerging market equity funds last week, surpassing the previous record of $5 billion in the week ended June 14, 2006.
An analysis of market movements during the current bearish phase and the last uptrend shows that the downslide has been much faster than the upward journey to the all-time peak last month.
While the market has taken just 20 trading sessions in the plunge from its peak on February 9 to current levels, the upward journey from the current level last traded (October 17) to its peak had taken as many as 99 trading sessions. The analysts believe that the long-term growth story of Indian markets still remains intact with the overseas investors and the coming days should witness further improvement in their buying activities as the recent plunge has led to an attractive buying opportunity.
According to Deutsche Bank, which held its third annual Namaste India Conference in Hyderabad attended by more than 150 global investors last week, medium term foreign investors are still positive on stock market here and India is actually less risky as compared to other emerging markets in the wake of the recent downslide.
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