FIIs are back; bring back 77% of May outflows

Foreign institutional investors, FIIs, who had pressed the sell button after May 11, seem to have come back to the Indian equity markets. After selling shares worth Rs 8247.2 crore in May they have put back Rs 6403.8 crore or 77% of their net May withdrawals.

The result is: Sensex has recovered 10% of the losses posted in the month of May.

In the month of August (till 25^th of this month) itself, the movers and shakers of the Indian stock markets have reinvested almost 43% of their net sales in May. Of course, the Tech Mahindra and GMR Infrastructure IPO have played their part in getting FIIs back to the Indian markets, believe analysts.

Despite high oil prices and an environment of rising interest rates, which have somewhat shown signs of slowing down now, FIIs have reposed their faith in the Indian growth story. India, the second-fastest growing economy in the world now, has been growing at a pace of 8% plus in the last three years.

FII shareholding pattern for the quarter ending June reveals that FIIs have increased their stakes in 188 companies against paring their stake in 177 companies.

Interestingly, FIIs chose a slew of midcap companies to increase their stakes as valuations looked cheaper and most of them were under owned during the April-June quarter following a massive hammering post May 10 meltdown, believes Sumeet Rohra of Antique Stock Broking.

Another interesting aspect that the data below reflects is the growing dominance of FIIs over other set of investors like the mutual funds and retail investors. While MFs purchased shares worth Rs 7573.04 crore in May when FIIs sold stocks worth Rs 8247.2 crore, the markets tanked almost 15%.

In June and July combined together MFs were sellers to the tune of Rs 2058.15 crore against FIIs’ net purchases of Rs 2866.1 crore, the Sensex gained a smart 5.79%. The same trend can be witnessed in the month of August. FIIs’ net purchases worth Rs 3537.7 crore against MFs’ net buys of Rs 251.46 crore, the Sensex has soared by 8.07%. 

This leads one to believe that FIIs, at least in the short-term (the period between May-August under consideration) tend to influence the course of the markets vis-à-vis domestic and institutional investors.

By Prasanna Zore