Business Daily from THE HINDU group of publications
Monday, Sep 04, 2006
Business Daily from THE HINDU group of publications Monday, Sep 04, 2006 |
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Markets - Foreign Institutional Investors Columns - A Ringside View JAYANTA MALLICK
CAUSE FOR CHEER: Stock brokers have a lot to cheer due to increasing investments by FIIs. — Paul Noronha FIIs seem to have recalled Baron Nathan de Rothschild's words: Buy to the sound of cannons, sell to the sound of trumpets. Last week FIIs pumped in a net investment of Rs 1,416.01 crore (considering provisional figure complied by the NSE). This was roughly Rs 1,300 crore more than the previous week. FII investment strategy, after massive pump-out in the second half of May and to a lesser extent in June, has been one of gradual return to Indian equities. The second half of August saw highest inflow since the meltdown. Market fundamentals, they appear to feel, support the long-term uptrend in select emerging markets — India being one of the chosen few. A number of managers of the overseas funds, after the deep correction, had spotted India in July as an opportunity to buy into the oversold equities at "attractive" valuations. A part of the India-specific money raised earlier is now being deployed. This week, the general strategy for the FIIs on Dalal Street could be continuation of selective investments, mainly in the 66-stock MSCI India Index which include number of mid-cap stocks. Global investors continued to pour in fresh money till end of August to funds directed toward Indian stocks. Hedge funds, which quickly withdrew money in the period between mid-May and June, have started to come back. For example, the $6 billion hedge fund group, Optima Fund Management, recently launched 12 Asia-focused funds with 15 per cent of the assets meant for India allocation. The overall investment sentiment is likely to remain mixed to positive for FIIs in the short-term. The Wall Street expects that the Federal Reserve might leave rates unchanged on September 20 like it did on August 8 and British Petroleum planned to restart half of the production at its Prudhoe Bay oil field by the end of this month. Nervousness among the global investors eased somewhat further last week after the Labour Department said 128,000 jobs were added, 3,000 more than expected, in August, bringing down the country's unemployment rate to 4.7 per cent from a five-month high of 4.8 per cent in July. Wages, highest since 2001, also bolstered the expectation that an US economic slowdown might not be as severe as some have predicted. However, concern over resumption of an upward trend in the global crude prices (supply from Iran may stop; the US is in the midst of hurricane season and the peak heating season is approaching) exerting additional pressure on Indian economy and its influence on the corporate performance is likely to dominate the discussion over the medium-term outlook. The possibility of the United Nations imposing sanctions on Iran, a crude major exporter, is a dangling risk for the oil import-dependant markets like India. The investment strategies for the local mutual funds, in the immediate term, also appear to be positive. After a sell-off in June and July, they turned net positive investors in August. Last week also they remained net investor. This week, the benchmark Sensex is likely to consolidate further within a range of 400 points. The Nifty and the MSCI India Index may finish in the positive on measured liquidity flow.
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