Feb 16, 2009

Instanex FII index : FIIS Sell $1bn Indian Shares

These are troubled times. A lot of articles have been written by the so called 'Analysts' that Retail Investor (read small investor) should buy in the current market while at the same time the smart money or the FIIs are existing the Indian markets. The Indian market was pushed up from 4K to 21K only because FII brought in amount of monies into the Indian bourses which were never heard before. And now that FIIs are leaving the market is bound to go down further. Analysts having fooled the FIIs with India shining campaign are now fooling small investor into the trap. If the small investor feels that they are more markets savvy, has more market news access he can go ahead and burn his hands in Indian stock market.

February 16, 2008
Deccan Chronicle The Asian Age
The FII index had severely under-performed the Nifty from January 1 to February 13 as the FIIs sold shares worth $1 billion in the Indian markets.

An analysis of the newly compiled Instanex FII index shows that on the day the FIIs sell they under-perform the Nifty and when they buy they out-perform the Nifty.

It is also a well-known fact that when they buy the market is up and when they sell the market is down. Very rarely is the market up when they sell, and if it is, it could be because the Indian financial institutions drove
the market on that day.

Gautam Chand of Instanex Capital Consultants Pvt. Ltd that has compiled the index of 15 scrips, says, “For example, year-to-date (February 13) in 2009, FIIs have net sold shares worth over Rs 5,000 crores ($1.04 billion). Over this period, the Instanex FII Index has lost 1.04 percent while the Nifty has fallen just 0.36 percent, confirming the trend that when they sell they under-perform the Nifty.”

He says that investors who wish to profit from their view on FII flows into or out of listed Indian equity shares could replicate the Instanex FII Index using shares or stock futures and expect to track the trend of actual FII
flows more closely. The Instanex study shows that the pattern of FII investments over the past five years indicates that FIIs make concentrated bets with their top 15 stocks consistently accounting for close to 55
percent of the value of their 1,000+ holdings and the top 100 accounting for close to 88 percent. The top holdings do not change drastically over time, further confirming that FIIs like to add to the same stocks when they invest additional amounts.

The Instanex FII index consists of 15 stocks —Reliance, Bharti Airtel, HDFC, Infosys, ICICI Bank, Bhel, HDFC Bank, ITC, HUL, ONGC, SBI, NTPC, L&T, TCS and Sun Pharma.

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