Business Daily from THE HINDU group of publications
Sunday, Dec 02, 2007
ePaper | Mobile/PDA Version
Business Daily from THE HINDU group of publications Sunday, Dec 02, 2007 ePaper | Mobile/PDA Version |
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Stock Markets Markets - Foreign Institutional Investors Industry & Economy - Regulatory Bodies & Rulings
“In November, while there was $1.45 billion FIIs outflow, the Sensex fell by 1.83 per cent. This data speaks for itself on the impact of FII investment on the market.” Our Bureau Mumbai, Dec 1 SEBI and the RBI appear to have differing views on the impact of FII inflows on the stock markets. Quoting a Securities and Exchange Board of India analysis, Mr Pawan Kumar Bansal, Union Minister of State for Finance, said on November 27 “there is no causal relationship between foreign institutional investments and changes in the stock market index”. On the very same day, in the report on ‘Trends and Progress of Banking in India’, Reserve Bank of India said the huge FII demand is putting pressure on equity valuations in India. Answering an unstarred question in the Rajya Sabha on whether short covering by FIIs has been contributing to volatility in the BSE Sensex, the Minister said: “Taking into account the turnover of foreign institutional investors from October 2006 to October 2007 vis-À-vis the total turnover, an analysis done by SEBI reveals that there appears to be no causal relationship between foreign institutional investments and change in the stock index.” On the other hand, the RBI report, referring to the recent movement in stock prices, said: “Although the macro-economic fundamentals are strong as also the corporate earnings, large demand by FIIs, given the limited supply of domestic assets, is putting pressure on the equity valuations. The PE ratio (of Sensex stocks) which was 18.6 per cent in February 2006, rose to 22.6 by end-September”. In the current year, the BSE Sensex has risen by 48.4 per cent over end-March 2007, and 74.6 per cent over end-March 2006. “The rally has been fuelled, among others, by FII investments. The net investments by FIIs during the current fiscal have been $15 billion till October 2007, about 163 per cent higher than the whole of 2005-06”, the report said. The Sensex zoomed from 12,366 on October, 3, 2006 to 19, 837 on October 31, 2007, rising 60.41 per cent. Net FII investments during the same period stand at $20132.5 million. The details of the SEBI analysis are not available. It is clearly evident that FII inflows impact the index, said Mr Anil Advani, Head of SBICAP Research. “In November, while there was $1.45 billion FIIs outflow, the Sensex fell by 1.83 per cent. This data speaks for itself on the impact of FII investment on the market.” On October 17, the day after SEBI proposed measures to restrict issue of Participatory Notes by FIIs, the Sensex moved down by 10 per cent. FIIs were net sellers on the day. FII demand putting pressure on equity valuations: RBI FIIs’ holding crosses Rs 10-lakh crore mark All 20 sub-accounts opt to enter through ‘front door’ More Stories on : Stock Markets | Foreign Institutional Investors | Regulatory Bodies & Rulings
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