Foreign investors' net selling crosses $1 b in Jan
Analysts say Indian equity will face pain in near-term.
Our Bureau
Mumbai, Jan. 29 Over the last three weeks, post the Satyam chief's confession
of an accounting fraud in the company, FIIs have been net sellers of Indian
equities for more than $1 billion.
According to the data available on the SEBI Web site, FIIs have been net
sellers of equity for $1.2 billion in the month of January. They have been net
sellers every day since January 7 of this year.
Marketmen said that the Satyam episode would have dampened FII sentiment, for
the short-term. "The sentiment has been negatively impacted for the near-term
as the FIIs will have issues regarding corporate governance. The trust of FIIs
in Indian companies' accounting methods has been shaken," said Mr Saurabh
Mukherjea, Head of Equity at Noble Group.
Mr Amar Ambani, Vice-President (Research) of India Infoline Financial said that
in already bearish and dull market such events can have a prolonged impact on
both sentiment and trade.
Many big FIIs have dumped shares through the bulk deal route ever since the
Satyam debacle. Barclays Capital, Citigroup, Goldman Sachs, Morgan Stanley,
Swiss Finance Corporation, Merrill Lynch, Adroit Financial and HSBC Investments
are among the major FIIs that have been selling since the beginning of the
month. Not surprisingly Satyam has been the most sold stock by the FIIs.
Research reports also point out that Indian equity will face pain in the
near-term and that the Satyam incident has indeed shaken investor confidence.
"Due to a combination of elevated base earnings, low-bond yields and depressed
share prices, the long-term return that is being implied by equity shares is
now looking more reasonable but not necessarily irresistible," said a recent
Morgan Stanley report.
Negative outlook
Ambit Capital's outlook has a negative outlook for the Indian markets for the
next 12 months due to "heightened risk aversion due to corporate governance
issues and the impending elections".
Through 2008, FIIs have been net sellers, in December there was a modest pick
up in FII sentiment. FIIs were net buyers for the month of December for $0.43
billion. But marketmen are of the view that the FII sentiment will turn
positive soon and this sort of relentless selling is a short-term phenomenon.
Mr Mukherjea said that FII trading activity will turn positive soon.
"India had experienced similar systemic shocks (bear markets of the 90s and the
tech bubble), but recovered and rallied over the long-term. The recent selling
has resulted in very low valuations, providing attractive investment
opportunities for long-term investors. Given the strong underlying fundamentals
and fall in interest rates, India is likely to recover sooner and grow at a
healthy pace in the years to come," stated a recent Franklin Templeton research
report.
http://www.thehindubusinessline.com/2009/01/30/stories/2009013051641600.htm
ekamber
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