Wednesday, May 31, 2006

FIIs Shave Indian Bourses of $2.36 billion

The shaving and haircut continues....

With another Rs 212 crore pulled out yesterday, the FII figures have reached an all-time record. In the month of May, they have in so far pulled out $2.36 billion or Rs 10,907.7 crore . In the last 11 days, they have only been selling, sucking out over $2.53 billion or 11,693.6 crore. (1USD=Rs 46.15)

Never before have they pulled out so much in a month. Not October 2005, not May 2004. In history, May 2006 could get recorded as the stealthiest wipe-out of a bull psychosis.

Yesterday the Dow and Nasdaq spread gloom as if to reflect the deluge of rain in Mumbai. Uncharacteristically it arrived early and at 10 p.m. and continued ceaselessly until 2.30 a.m. this morning, about the time that US markets closed.

While the dollar fell against the euro and yen, it continues to make new highs against the rupee. This is not very heartening. While the usual answere being dished out is that importers are adding pressure it is clear that such steep and consistent slide can only come from heavy demand, which is from the FIIs, corroborated with the fact that they are pulling out money from the Indian stock markets.

Oil prices are impacting the US economy, and hence stock prices there, but since ONGC has a heavy weightage Indian investors are fooled in to believeing that gains for ONGC is gains for all companies.

Oil prices have a direct correlation to ONGC but an indirect correlation to everything else. Sooner or later India will be on a path to higher inflation, and to contain this the RBI will be forced to hike interest rate hikes. This is going to spell a lot worse for Indian corporate sector.

Good new is rains have arrived earlier so the farm sector would be bouyant, with tractors and fertilizer companies looking up. If the rains sustain well, then we can see the consumer goods companies leading the charge.

Posted by Eclectic Investor at 9:41 AM  

1 Comment:

Rajeev mundra said...

u have turned an fii expert ;)

10:09 AM  

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KM

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IN PASSING

Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book


“When everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

“Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

"Most people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

The most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Prachi Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror

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