Wednesday, June 07, 2006

May Facts

WITH Rs 8,247 crore (about 5%) pulled out of the system, May 2006 was immensely painful to most traders and investors. But the shenanigans of FIIs and mutual funds enabled interesting conclusions.

Until May 2006, FIIs had Rs 1,51,753 crore ($33 billion) invested in Indian equity and Indian mutual funds Rs 30,573 crore ($6.6 billion). This leads us to conclude that Indian mutual funds are 20% the size of FIIs. (1 USD = Rs 45.90)

The current exodus of funds was 5% which was easily absorbed by the Mutual Funds.
The question now is what happens if FIIs decide to move out anyway, and Mutual funds face redemption pressure.

Historically, there has been no pattern to FII and Mutual fund behavior in May, as the table shows, so to draw any conclusion would be difficult, however, in the last 4 years:

1. From 2004-2006, FIIs have always had sales in May
2. From 2003-2004 mutual funds have always had net purchases in May
3. In May 2000, the FII and MF investments were almost on par

In all likelihood May 2004 has been the worst May ever, since the net sales has been the highest at Rs 2,246.36 crore. Compared to May 2004, net sales has been only Rs 674 crore this time.

Posted by Eclectic Investor at 12:32 AM  

1 Comment:

Rajeev mundra said...

nice analysis dude... ur ideas are good.

11:52 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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