Skip to main content

FII FLOWS RUNNING THE MARKET






Indian rupee has seen depreciation in the last 3 months at a rate that has confused most of the market players and analysts. If we think rationally, looking to the deep financial crisis in the USA, the value of USD should depreciate against the currencies of the countries with sound financial systems that are less impacted by the global turmoil. But ironically, INR has depreciated by more than 23 per cent in the last 9 months.


There may be many reasons for the depreciation in the Indian Rupee, but if we analyze the movement of SENSEX vis a vis INR, we found some pattern in the movement. The SENSEX touched a record high of 20873.33 on 8th January 2008 and INR touched a record low of 39.2650 on 15th January 2008. It is quite evident that the sentiment in the Indian Equity market became very bullish after the FII funds inflows were very strong and SENSEX rose from a level of 4500 in early 2004 to 20800 in January 2008 (Less than 4 years). But due to the current Financial Market Crisis, the FII flows have reversed and an outflow of Rs 37000 crore was done from the Indian Equity market . FIIs have been the drivers of the market till now, and they will be the crucial in future too. Since January this year, Rupee has also started depreciating and main reason for the currency movement can be attributed to the loss of confidence in the equity market and the resulting FII outflow.




Comments

Popular posts from this blog

WHERE ARE THE EXPERTS?

When the equity market across the globe was in bull phase in the last year, we saw a lot of market experts appearing in the News Channels and print media giving tips for becoming rich overnight. This phenomenon was not only observed in India, but it was seen elsewhere. Wealth Management, Private Banking, Cross selling by the Banks for investment in Mutual Funds were the buzz word. The glamour and hype of the market was such that any TOM, DICK and HARRY from a third class B-School was selected for Investment Banking by the private investment consultants, brokerages and even so called very smart Banks for the wealth management and private Banking. Where have gone all the experts? Where are technical experts and Stock Analyst? Who is responsible for erosion of wealth for the investors? Who will take responsibility for failure of Banks particularly in USA and Europe? Why 150 year old institutions are failing? Why there is loss of confidence in the financial system? I know, nobody will co...

UNITED SOCIALIST STATE OF AMERICA

USA IS NOW USSA UNITED SOCIALIST STATE OF AMERICA Do you still feel that USA is a free market economy where government’s work is only governance? When USSR failed in the late 80’s, the western media was quick to point out that it is the end of Socialist character of the State. These experts pointed out that Capitalism is the best way for nations to prosper. Now it is only almost 20 years from that timeline and US free market economy is in shambles. The champions of Capitalism are hiding their faces and it is only the government that has come to the rescue of failing companies. The biggest insurance company has already been nationalized (but they call it bailout). If the government does not nationalize its big banks, the US economy may go to its historical lows. In the name of free market economy the private institutions treated the public money as their own private money (not for public benefit as a trustee of that money). The government official and also the regulators utilized their ...

HAVE WE LEARNT ANYTHING?

Beware. Once again experts are prowling for their prey. People are being given tips to make easy money. FII flows are coming to the equity market and market is zooming targetting new highs as if there was no problem last year. Sensex crossed 17000 and new targets were set on business news channels luring people to again invest in the stocks. Mutual fund sales pitch increased and new schemes are being launched. But does the situation is so goody- goody? In my personal opinion, again this is exuberance and experts are betting on greater fool theory.The greater fool theory (sometimes the bigger fool theory, also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a bigger fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else for an even better price. Today most o...