The Hindu Business Line : How much more can FIIs sell

Mumbai, Oct. 10 FII investments in Indian equities, from the time they commenced buying in India, has amounted to $56 billion as on Friday, SEBI data showed.

The value of this investment on Friday would not be $56 billion, of course, but how much of this is likely to be sold, marketmen were wondering. On this hinges the fate of Indian stocks in the near future.

More on cards?

Going by the FII investment figures (see table) it is possible that another $7 billion to $8 billion in equities could be shed by them, estimate analysts. FIIs have already sold equities worth more than $10 billion in 2008.

Taking October as the base month, the largest increase in FII investment was between 2004 and 2005, when net buys by FIIs rose by $36 billion. But the Sensex was at 8,483 in October 2005 and FIIs are likely to hold on to those investments, said an analyst. Of course, this is a crude way of calculating as one does not know how much of those investments they have sold to re-enter the market, but it is a rough indication on what is to come, said one analyst.

The next large chunk of investments came in 2006-2007 (October) amounting to nearly $18 billion. In October 2007 the Sensex was above 18,800, much higher than now.

It is this $18 billion of investments that FIIs they are likely to offload first to cut losses, said the analyst.

“They would calculate on a last-in, first-out basis. What they had invested in 2004-05 has still gained enormously from what the Sensex levels were then.”

By this estimation, at least another $8 billion can be sold by FIIs, he said.

Uncertainty

Mr Motilal Oswal, Chairman & Managing Director, Motilal Oswal Financial Services, was of the opinion that little can be said when one could not predict what would happen overseas. “But there are some long-term investors among FIIs too, entities like pension funds and so on who are not likely to sell too quickly.”