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Rise or fall: FIIs rule the market game

Posted by Yogesh on Saturday, 18 October, 2008

AHMEDABAD: The law of gravity caught up with the sensex on Friday with a weak end on an edgy weekend. If the journey from 10,000 to 20,582 took 23

FIIs rule the market game

months, the journey down has taken just nine months, with the close at 9,975 points. Both ways, foreign institutional investors (FIIs) have played a major role in pushing up the index and pulling it down, hurting themselves in the process.

During the ride of the sensex from 10,082 points on February 7 ’06 to 20,582 points on January 10 ’08, FIIs had made a net purchase worth Rs 1,00,951 crore. During this period, the FIIs provided the required liquidity and the cues for others to follow.

FIIs’ net off-loading was to the tune of Rs 47,299 crore for dragging down the sensex from 20,582 points to 9,975 points, putting a complete squeeze on liquidity.

It means that during the upward journey, FIIs spent Rs 9.61 crore for lifting the index by each point, while as the sensex fell by each point, they could suck out only Rs 4.46 crore. Market analysts say that at the sensex peak, FII holding in the Indian equity markets was around Rs 12 lakh crore, which is now down to only Rs 4 lakh crore. The slashing of value by one-third, even though the sensex has fallen only by 50%, shows FIIs been badly hit, often because of sharper fall of stocks outside the index.

This clearly indicates that bear markets are usually shorter and swifter than bull markets. “While buying is done by way of accumulation, there is no sense of urgency to it. Where as when you sell, you actually do it in a state of panic, which has a larger impact on the share price movement,” said V K Sharma, research-head, Anagram Securities. Friday’s fall will leave a deeper impact because of psychological fear.’

Source Times of India


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