The Hindu Business Line : Disconnect between FII sales, outflows

Chennai, Dec. 22 Data on sales and purchases by FIIs are available on SEBI’s Web site the very next day. On the other hand, as a matter of policy, Balance of Payments (BOP) data on the money that FIIs bring into the country and take out of it, are made available only at quarterly intervals, three months after the end of each quarter.

Since the two sets of data are rarely tallied, the feeling persists that FII money which leaves the market simultaneously exits the country as well; even though BOP data consistently shows that this is simply not true.

With the exception of the ‘harvest’ in January/March 2008, in all other quarters from April 2007 to June 2008 (the latest quarter for which BOP data are available), BOP outflows were much lower than SEBI sales. Amounts varying between Rs 14,000 and Rs 39,000 crore seem to have been retained by FIIs for ploughing back into the market, both when it was rising and when it was falling. Correspondingly, except for January-March 2008, FII purchases reported by SEBI are greater than FII inflows in all other quarters.

The point is that, faced with a market that is fluctuating wildly while simultaneously testing ever new lows, investors should keep BOP figures for the recent past in mind while interpreting SEBI figures for FII transactions between July and November 2008.

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