The Hindu Business Line : FIIs continue gross purchases amidst net outflows

BL Research Bureau Foreign institutional investors have pulled out investments worth $3.2 billion on a net basis in 2008; a figure which when compared to the net investment of $17.2 billion last year shows that the recent outflows account for 18 per cent of last year’s inflows. But the real picture may not so grim. This is because gross purchases made by FIIs in the current year have continued at the previous year’s levels.

The gross purchases show that in 2008 FIIs have maintained monthly average investments of $15 billion in the first three months, although March is yet not over. This compares favourably with $16 billion per month figure clocked by FIIs in 2007. A perceived slowdown in corporate earnings linked to US recession and lack of near-term of positive triggers in domestic markets have been amongst the factors that has led to FIIs dumping stocks.

While FIIs have continued to buy Indian stocks, the real problem has been that there has been a steady stream of selling that FIIs have indulged in. This is a trend that can be seen right from late last year. From October, the Indian markets have faced turbulence. FIIs had already pumped in net investments of over $17.1 billion by October and this number barely changed by year end.

In 2008, a major portion of this money has been siphoned out with three-four major crashes occurring in a space of 10 weeks. The selling has been particularly high during the sharp corrective phases. Figures for FII activity in January 2008 alone show that they were net sellers to the tune of $3.2 billion worth of shares, with a bulk of selling happening during the January 14 to 25 period. Between February 25 to March 7, FIIs have sold lesser number of shares – $330 million. The number of new foreign institutions registering with SEBI has also seen 7 per cent increase to 1,304, from 1,219 at the end of 2007. Likewise, the numbers of sub-accounts have risen to 3,922 from 3,644.

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