• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Sudhanshu Ranade

Advertisement

Chennai, July 7 Though the Sensex plummeted by 4,600 points between January and March 2008, FII inflows over this period were just 5 per cent short of inflows between October and December 2007 (when the Sensex rose 3,000 points); and 52 per cent larger than inflows between July and September 2007 (when the Sensex went up by 2,600 points).

This puzzle resolves itself when capital outflows are taken on board. Or does it?

The RBI data on net FII flows fit with, and can therefore be used to ‘explain’, the rise and fall of the Sensex.

But that still leaves us with the problem: figures for ‘investment income’ outflows (which include interest on ECBs and NRI deposits) are so very small that they cannot possibly include repatriation of profits by FIIs.

Repeated efforts, over the past three months, to clarify this point with the RBI met with a deafening silence.

Nevertheless, since ‘dividends’ on FII investment are not reported anywhere else, it is possible that the RBI simply clubs outflows of profit and capital, without differentiating between the two. Suppose we did know for sure, would it matter?

It certainly would.

Prospectively speaking, there is a world of difference between a ‘sky is falling’ scenario in which the Sensex plummets because of fears that ‘FIIs are pulling out’, and one in which even a steep drop in the market can simply be attributed to profit-booking.

More Stories on : Foreign Institutional Investors | Forex

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Manmohan lines up meetings with leaders to garner support for n-deal

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line