Stocks ease, but not FIIs

The stock markets have eased somewhat in two sessions on profit-booking after the Sensex touched new highs, but foreign institutional investors are still net investors with investments in September hitting Rs 20,855 crore on Thursday, the second highest ever for a month. Sandeep Singh reports. See graphic

The stock markets have eased somewhat in two sessions on profit-booking after the Sensex touched new highs, but foreign institutional investors (FIIs) are still net investors.

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Investments in September hit R20,855 crore ($4.5 bn) on Thursday, making it the second highest ever for a month.

With five trading days still to go in this month, the FIIs seem to be on their way to cross the record of R23,872 crore registered in July 2007.

However, Thursday witnessed a volatile trading session with the 30-share Sensex closing at 19,861 — with a fall of 81 points. But even then, FIIs pumped in R1,505 crore.

While FIIs rush in, experts do not see their hyperactivity as a healthy development.

“Larger participation by domestic institutions and domestic savings would have resulted in a better balance of funds mix in the rally,” said Anup Bagchi, executive director, ICICI Securities. “Very large FII flows in secondary markets makes it susceptible to reverse momentum sometime in the future.”

Experts also say India is more or less “decoupled” from the West in terms of economic performance but in terms of market liquidity it is not — and that needs to change.

The BSE Sensex has risen 1,890 points or 10.5 per cent so far this month on the back of secondary market investments by FIIs, while their primary market investment has been only 7.3 per cent of the R20,855 crore that has come in this month.