Domestic MF’s Not On The Footsteps Of Fiis

Local funds are no longer following the footsteps of foreign institutional investors (FIIs). They are, in fact, moving in the opposite direction. Between 19 September 2007 and 26 September 2007, when the 30-stock Sensex did its fastest ever 1,000-point sprint, local fund managers were selling stocks while their foreign counterparts were pouring in money.

On 27 September 2007, too, when the benchmark index for the first time closed over 17,000 points, gaining 229, the trend continued. Nifty, the broader market index, also took a big leap to cross the 5,000 mark. The trigger for the rally was the US Federal Reserve's decision to reduce its policy rate by 0.50% to 4.75%. That brought relief to global stock markets, worried about the impact of the US subprime mortgage problems.

Going by the website of capital market regulator Securities and Exchange Board of India, during 19-25 September 2007, domestic funds sold stocks worth Rs 1,087 crore while FIIs bought equities worth Rs 7,871 crore, net of selling. Since January, FIIs have bought $11.63 billion (Rs 48,732 crore) in the Indian market. Incidentally, during the Sensex's previous 1,000-point rally from 15,000 to 16,000, local funds were the big driver. After hitting 15,000 for the first time on 6 July 2007, the Sensex dipped to a low of 13,989 on 21 August 2007 as the fear over a credit crunch gripped global markets. It finally reached the 16,000 level on 19 September. After buying into Indian stocks heavily in July, FIIs sold Indian equities worth Rs 7,770 crore in August, whereas local funds bought equities worth Rs 4,093 crore.