| Highest ever single day loss for sensex trading | | | | their qlitter. While it is too early to ascertain how much |
| stopped at NSE & BSE as lower circuit is hit. | | | | money is like to have been pulled out by FIIs, it is quit |
| Rs.7,00,000 cores of market capitalization wiped off in | | | | obvious it must be considerable. It is not likely to be a |
| a single day at the bourses black Monday. The above | | | | one way bull for all times. It is the stock markets as all. |
| are some headline taken at from leading business | | | | What goes up, has to come down. i.e. to reasonable |
| declines. The month of may 2006 has turned at to be | | | | levels. But what is that level is the million, dollar question |
| cruel for investors and traders not surprising, | | | | bunting Indian minds. A broad market FE of 15 is very |
| considering the following single day declines.o 826 | | | | reasonable. To quote a sensex target is hazardous, |
| points May 18,2006o 483 points May 19,2006o 1,111 | | | | but a level around 8500 is very much in tune with |
| points (May 22,2006) partial recovery later | | | | technical indicators. |
| All that scud above should not make the reader think | | | | FUND BUYING in the year 2006 |
| very negative above Indian Economy. Indian economy | | | | Date FIIs Sensex |
| has been performing exceedingly well in the last 3 | | | | 31-Jan 3677.8 9919.89 |
| years coming out of a very devasting drought in 2002 | | | | 28-Feb 11265.5 10370.24 |
| in many parts of India rains, consequently agriculture | | | | 31-Mar 17654.1 11279.96 |
| and other allied sectors have been on a reband since | | | | 30-Apr 18476.2 12042.56 |
| then. A record Rs.1,00,000 crores of rural savings | | | | 31-May 11122.1 10398.64 |
| wealth was waiting to be tapped by various savings | | | | 30-Jun 11601.8 10609.25 |
| and investment channels. | | | | 31-Jul 12746.7 10743.88 |
| The foreign institutional investors or FII and took note of | | | | 21-Aug 16524.1 11511.68 |
| a resilient economy and made huge investments in | | | | Source: SEBI bulletin |
| Indian bourses. Their investments were to the tune of | | | | FIIs and mutual funds continue to maintain a positive |
| 8 billion Rs in 2005-2006, Rs.7 billion the year before | | | | outlook on the markets, even though the amount of |
| and Rs.6 billion in 2003-04. Such huge indict allocations | | | | redemption continues to be higher than the amount |
| were inheard of till now since they knocked on Indian | | | | invested in the markets post-crash. |
| doors after our economy liberalized in 1991 under | | | | As per SEBI data, till May 11, 2006 FIIs had invested |
| Mr.P.V.Narasimha Rao. Not to be left behind agricultural | | | | Rs.22,243.3 crore in the Indian markets. When the |
| sector industrial economy surged a head posting 7% | | | | markets crashed, they redeemed to the tune of |
| GDP growth. Certain sectors like capital goods, IT | | | | Rs.10,641.50 crore by the end of June. |
| sector have recorded double digit growth rates. The | | | | The markets took a positive turn in July, with FIIs |
| commercial vehicle and two-wheeler companies have | | | | turning net buyers. The investment form July till August |
| recorded over 30% growth. | | | | 18 has been Rs.4,403.7 crore. "The recovery has |
| As a very logical corollary, stocks boomed all through. | | | | happened, albeit not fully. There is still an amount of |
| From a low of 2950 for sensex, 950 for Nifty in the | | | | around Rs.6,000 crore which has been lost during the |
| year 2006 to a high of 12670 for sensex in May | | | | crash," said an analyst. |
| 11,2006 (and 3650 for Nifty), it has been a very | | | | P/E Ratio |
| dizzying height. | | | | 2006 Nifty Sensex |
| The number of FIIs recorded an at the time high of | | | | 1-Jan 17.16 18.37 |
| 950 as per SEBI date. This comprised of not only well | | | | 31-Jan 17.9 18.6 |
| known as timers like morgan stantley, UBS, Deutsche | | | | 28-Feb 18.27 18364 |
| bank, Warburg pincus etc but also first time investors | | | | 31-Mar 20.26 20.05 |
| from Japan, Korea and Arab nations. But among the | | | | 30-Apr 20.31 21.35 |
| investors were the much dreaded hedge funds. These | | | | 31-May 17.46 20.41 |
| funds more into every country where they see good | | | | 30-Jun 18.44 17.9 |
| valuations invest in them and cash out as soon as | | | | 31-Jul 17.64 19.02 |
| they make their profits. | | | | 31-Aug 19.15 19.6 |
| These funds are supposed to have sold very heavily | | | | 30-Sep 20.92 20.73 |
| in May,2006. Some of them are supposed to have | | | | 30-Oct - 21.48 |
| made a small debt in their capital too markets know | | | | Source: BSE/NSE bulletin |
| very well that they do not take kindly to it. | | | | Even as the benchmark BSE Sensex breached the |
| To conceptualise shortly, Indian markets are going | | | | 13,000 points today, market players, in particular FIIs, |
| through a structural Bull phase since 2002. This is | | | | cautioned beside unsteadiness. Going by SEBI data, |
| supposed to last a decade in the least FIIs have rated | | | | net FII investment in equity in the period |
| India rating, a single data enough to convince skeptics | | | | January-October 30, 2006 is $6.533 billion. It crossed |
| crude oil has also barrel to 74$ high in 2005 fall. i.e. | | | | the $7 billion mark if debt market numbers are added. |
| markets have surged a head after digesting this major | | | | Fresh inflow of funds from new global markets like |
| international irritant crude hurts growth, but India is a | | | | Australia coupled with strong earnings growth reported |
| major growth engine. So, India was a darling baby of | | | | by domestic companies lifted the Sensex above |
| global investors. | | | | 13,000 to close at an yet another all-time high of |
| Then, what sense to make of May, 2006 mayhem? Is | | | | 13,024.26. |
| Indian bull run over? | | | | Conclusion |
| An emphatic no is the answer. | | | | Investors can pick up stocks at these levels for a |
| The FIIs and hedge funds have pull out money mainly | | | | growth story for long term i.e. for equities a 5 years |
| becomes of higher interest rates in U.S. please note | | | | holding period is reasonable to give a very above |
| federal reserve has recently increased interest rates | | | | average return. Caution may be exercised to buy only |
| to 4.5% under their new governor. The above | | | | good, well established market movers and never, to |
| increases the reverse flow into U.S. from India of FII | | | | buy on margins or play intraday or dabble in derivatives |
| investments Indian stocks were no longer cheap; at | | | | market, which is high risk. |
| least in the short run. It's broad market in FE multiples | | | | * Lecturer, Department of Commerce, Bharathiar |
| (Forward Earnings) were 22. In comparison to its | | | | University, Coimbatore - 46. |
| neighbours, it was costly. | | | | ** Ph. |
| As a consequence, Indian bourses have briefly lost | | | | |