FIIs led rally, to make a killing

The notional wealth of investors has appreciated by Rs 6,66,879.5 crore since the Sensex touched 14,000, report BSS Reddy and Suprotip Ghosh.
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Updated on Jul 06, 2007 10:49 PM IST
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Hindustan Times | ByBSS Reddy and Suprotip Ghosh, Mumbai

The notional wealth of investors has appreciated by Rs 6,66,879.5 crore since the Sensex touched 14,000 on December 5, 2006.

The market capitalisation of the Bombay Stock Exchange touched Rs 43,08,329 crore at close of trade on Friday.

Mostly foreign institutional investors buying into in blue-chip stocks like Reliance Industries, Larsen & Toubro, Bharti Televentures and ICICI Bank drove the rally.

“FIIs and people who are in the know of their movements in the market were the main beneficiaries from this rally,” said VK Sharma, head of research at Anagram Securities.

Retail participation is much lower this time around. “Most small investors betting on the vast majority of underperforming stocks barely broke even, or lost money,” said Rajiv Sampath, an independent market analyst.

Investors in mutual funds who largely stayed invested in blue chips have also managed to make profits. “The route you take to invest in the market has turned out to be very important in this rally,” he added.

FIIs invested over $2 billion (Rs 8,000 crore) in the Indian capital market in the last five days and Rs 27,479.50 crore in the current calendar year. That is more than double the Rs 12,733.50 crore they invested in the same period last year.

“There is an apprehension in the market that most of this investment was made in the initial public offerings. If this proves to be correct, today’s rally might prove to be a farce,” said Chavi Prakash of Asit C Mehta Investment Intermediaries.

According to data released by the market regulator, the Securities and Exchange Board of India (Sebi), in the month of July alone, FIIs had bought Indian paper worth a net Rs 8,547. 60 crore.

Mutual funds’ investment patterns, however, showed a different trend. In July, they sold equity worth a net Rs 408.60 crore, according to Sebi data.

FIIs also stood to gain from to the appreciation of the rupee in the last quarter, boosting their returns, said Sampath.

Looking ahead, Manish Sonthalia, vice-president (equity strategy), Motilal Oswal, said, “Corporates are expecting to post 18-20 per cent growth in the second quarter of 2007-08.” This could be a pointer to the sustainability of the latest rally.

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