The non-resident Indians it seems are wise investors as they have a knack for recognising buying opportunities when the markets dip and they indulge in heavy selling when the stocks rally northwards.
An analysis of NRI trading activity on the Bombay Stock Exchange (BSE) shows that they, sensing the opportunity amid the weakness in markets, doubled their buying spree in August so far compared to their last month's purchases.
The benchmark index Sensex lost a whopping 1,000 points over just 15 trading sessions between July 27 to August 17 amid the global markets buckling on concerns relating to the US sub-prime lending.
NRIs purchased shares worth a net of Rs 6.94 crore in August so far in BSE. They bought Rs 3.29 crore shares in July when the index gained about 900 points but the month also saw a sharp decline towards the last week.
Analysts believe NRIs have been attracted by the correction in the markets after they achieve the new peaks which is providing them an appropriate opportunity to buy into equities.
A similar trend in the NRI buying activity has been witnessed over the past six months as well. In January, the benchmark index had gained over 300 points and NRIs made net sales of Rs 2.16 crore. They turned net buyers worth over Rs 68 crore in February. The benchmark index had plunged over 1,000 points in the same month. MORE
In March, NRIs purchased shares worth over Rs 76 crore while again in April when the index jumped up 800 points they were net sellers to the tune of Rs 24.88 crore.
The net sale or purchase by NRIs averages to Rs 10 crore in a month, the analysis shows.
In May and June, NRIs remained on selling spree when the markets were rallying northwards. Overall, in the current year so far NRIs have bought shares worth Rs 79.37 crore while the benchamark index has made a net increase of just 300 points, shedding the gains it had made over the year.
NRI buying and selling trend reveals a smart assessment of the market and they are interested in making money from trading in domestic bourses, a market observer said.
Last year, NRIs were net sellers of equities in six months while the rest of the time they had made purchases when the market had suffered some correction bouts.
Overall, in 2006 the benchmark index had added a neat 4,300 points and in contrast the NRIs made purchases of just Rs 7.87 crore over the year, the data show.
NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares or debentures of Indian companies. They are also permitted to make portfolio investments that is, purchase of shares of domestic firms through stock exchanges. These facilities are granted both on repatriation and non-repatriation basis.
However, according to Indian Government norms there is a ceiling on investment by an NRI for purchasing up to five per cent of the paid-up value of shares of an Indian company on both repatriation and non-repatriation basis.