The Crash( 17.5.2006) and FII activities since then

[Czar]

PK

Some more figures and some more confusion

The net investments (Buy-Sell) of the FII for themonth of MAY is -7754 Cr.

Total Market cap at the end of MAY 2884136 Cr.

% of the money FIIs pulled out in May to Market Cap is 0.3% (I am keeping it simple, actualy little less if we do the exact artimatic)

% of index fall in May is nearly 18%

0.2% pullout caused a drop of 18% in the index

Am I looking it right? Am I going wrong somewhere? I am a technical man and not a student of economics. So may be Iam looking at it wrongly. Maybe you can throw some light on this.

regards

karthik

so to answer your question the .2 % dint bring down the market it was brought down & cracked as they already build their short systematically... god know since when is this planned...& investors asking since feb index is rising continuously why my blue chips are in losses...

 

[pkjha30]

PK

Some more figures and some more confusion

The net investments (Buy-Sell) of the FII for themonth of MAY is -7754 Cr.

Total Market cap at the end of MAY 2884136 Cr.

% of the money FIIs pulled out in May to Market Cap is 0.3% (I am keeping it simple, actualy little less if we do the exact artimatic)

% of index fall in May is nearly 18%

0.2% pullout caused a drop of 18% in the index

Am I looking it right? Am I going wrong somewhere? I am a technical man and not a student of economics. So may be Iam looking at it wrongly. Maybe you can throw some light on this.

regards

karthik

Hi Karthik

I never pretended to be a student of economics. But I can say two things here.

Reporting Date-- Debt/Equity-- Gross Purchases(Rs Crores)-- Gross Sales(Rs Crores)-- Net Investment (Rs Crores)-- Net Investment US($) million at month exchange rate
Total for May-- Equity-- 47728.80-- 55082.90-- (7354.20) --(1630.30)

Total for 2006-- Equity-- 215912.40 --204790.40--- 11122.10--- 2494.90

Grand Total till May 31, 2006-- Equity --1069729.40-- 883165.10--- 186564.30--- 43595.40

The figures in bold indicates that FIIs are still a net investor by end of may 2006. In May they were net seller by Rs. 7354 crs.(SEBI figures)

Now coming to your question why the pullout caused heavy pulldown of sensex.

Some reasons.

1. If FED rates increase money will fly to USA
2. If Japan raises interest rate as is expected less cheap money will be available to fund speculation.
3. China Factor and that it is still hotting up.
4.USA is having Balance of Payment crisis, strangeas it may sound but it is true.America is consumed by consumerism on cheap money and cheaper imports.
Once that is tightened, export from emerging markets to USA will be difficult.
5.If dollar is strong American export will dry up. They need weak doller.
6. If Dollar is weak export to USA will be less, affecting emerging markets.
7. Heavy F&o operation by FII shorting the stocks. That is why czar asked the question.
8. Infuture things will get from bad to worse as speculative money will be less in supply
9. Swiftness of withdrawal
10. Anticipation of this happening for long.
Pull Back is always directly related to the amount and inversely to time. By that factor, pull back should be around 54%. Sounds terrible. That is what nomura is telling now taking Fair Asset Value model hedging operations on a world wide scale.

So is the fear. Lastly what if our growth story is infact concocted by FII buying experts.

So what to do now. I think and still continue to hold that Indian Economy is on growth path. Long way to cover even now. We are in a long term bull cycle on account of scope for growth and improving fundamentals of frontline company. We are a market in our own right and our exports are but a small percentage of total GDP. The problems are two. Widening gap in balance of payment. and large fiscal deficit coupled with excess unproductive revenue expenditure. We need to improve our productivity , effeciency and competitiveness to stay on the growth path.Fortunately reforms appears to be irreversible and people are becoming aware.
Another area of concern is state finacial profligacy. That will spell doom for many if populist policy is continurd through states. As of now there does not seem to be effective check on that.

Hope I have not confused you further Karthik

Pankaj

 

[pkjha30]

so basically in april this rejoicement was only due to heavy weights like ril & ongc, etc being used to drag the index up & help them shorting heavily in derivates ofcourse nicely hidden...

funny thing is sebi site gives net monthly figures for equity why not for derivatives ?

Hi czar

SEBI does give FII derivatives figures. Looks we become wiser after the knockout punch.
Here is the figure for 31.5.2006

Details ---------Buy---Sell ------Open Interest(Rs. Crs.)
index futures---605.11 --1119.67 --- 7779.72
index options---124.41---82.97--- 1426.12
stock futures ---379.71---285.17---12266.79
stock options---7.07---1.63---36.60

Attached word documet gives daily figure for Jan 2006, Apr 2006 amd May 2006.
Also Have a look at the following documents
http://www.nseindia.com/archives/fo/monthly/DU_042006.pdf

Read NSE achievements in April 2006 in Derivatives.

during April 2006 average daily figures for
volumes & contracts traded have increased compared to the previous months. The ratio of average open interest to average traded value has decreased from 141 % in March 2006 to 119 % in April 2006.

proportion of Index products has increased in this month as compared to Stock products from 33 % in March 2006 to 35% in April 2006.

the contribution of Institutional trades & Proprietary trades has increased in April 2006.

the maximum number of members is observed to be trading in the category of ‘Rs. 1000 crores and more’.

the ratio of Futures & Options segment to Cash segment was more
than 4 times for the first time since F&O segment has commenced.

in April 2006 all the products recorded an impressive growth in daily average volume and contracts traded. Open interest increased only for stock products.

NSE continues 1 position in the world for number of contracts traded in Stock Futures.
NSE --4th exchange in the world in terms of contracts traded in Index Futures.

Top 5 most active Futures contracts:
Sr.No.. Contract Descriptor,No. ofContracts,Traded Value,(Rs. Crores),Percentage of Contracts to Total Contracts
1 NIFTY APRIL 2006; 4,645,646; 161912 ;29

2 NIFTY MAY 2006; 1,161,746; 40697; 7

3 TATASTEEEL APRIL 2006 ;466,545 ;19022; 3

4 RELIANCE APRIL 2006; 416,855 ;22898 ;3

5 SATYAMCOMP APRIL 2006; 314,949 ;15610 ;2

OTHERS 8,862,823 ;404654; 56

TOTAL; 15,868,564; 664793 ;100.00

Then There is Disclaimer.

Got Any Idea. Czar and Karthik


Pankaj

 

[Czar]

no dada...I am talking about monthly total net buys & sell not daily...

 

[rheinu]

Hallo Friends

The FII figures include not only frm Secondory mkt but frm IPO s also..

Am i not right? In April the REL PETRO IPO and IOCS block sale of ONGC to FIIs figure in their buy list.

rheinu

 

[pkjha30]

Hallo Friends

The FII figures include not only frm Secondory mkt but frm IPO s also..

Am i not right? In April the REL PETRO IPO and IOCS block sale of ONGC to FIIs figure in their buy list.

rheinu

Hi rheinu

Yes . You are right. But derivatives can't include IPO data. It is only in equity figures that ipo is included.. That in a way widens the gap and heightens the impact of F7) operations of FII. Isn't it?
Pankaj

 

[pkjha30]

Hi

Early signals of attempts to cool raw nerves of the retail investors are seen. Mostly by Desi FROGs. They are again coming out of their lair and telling that valuations are now attractive. Stocks are quoting at 15 PE current and 12 PE going forward in 2007. This is great. ans so on so forth. Unless retail investors flock to the market whose money will they( meaning FII) take. Certainly not that of one of their own. If they are into investment kind if thing then its a question of takeing part in growth. But remember NOMURA says fair value is 7300.

Two of the videshi FROGS have croacked and it was splashed in newspaper . It goes like this. If you have some guts still left show us and we will come.Money is there which will againn be used to pump money out of poor retail investors who got baly burnt while paticipating in the last leg of Bull Rally.

So Global cues are neutral Foreign markets are fluctuating just like India's. FROGs are taking neutral stand. Bit of good corporate results are shown in positive outlook.

Sokescreen, Fog, diversionary tectics confusion in the minds of investors, showing seed of doubt. These are the ingradients of FII actions and it started even before there was any hint of it.

Next week market will continue to oscillate. As per my calculation with the swiftness of pullout by FII could have caused areound 54% downside. I.e. sensex at 6400-6500 . That was the estimate given by Baron also. But market has resisted so far and perhaps slated to gyrate between 9600 to 11000. This is commoner's view.

Well well.... I am not here to give any forecast or estimates. Not a person qualified to do that.Let market find its own rythm. No advise for return or otherwise. Investors can make their choices.My only advise is not to loose nerves and let facts speak for themselves.Remeber FII follows First In First Out system for booking profit. They dont wait for peak or bottom. as there is none. It may be stock specific actions.It is not the proposition of anybody that bulls will make money only when sensex goes beyond12890. It can be made also from present levels. For Long term there is no problem for next 10 years as India is on growth path. However ,I will post FII data as much as possible.

Regards
Pankaj

 

[Agilent]

PK

% of the money FIIs pulled out in May to Market Cap is 0.3% (I am keeping it simple, actualy little less if we do the exact artimatic)

% of index fall in May is nearly 18%

0.2% pullout caused a drop of 18% in the index

Am I looking it right? Am I going wrong somewhere? I am a technical man and not a student of economics. So may be Iam looking at it wrongly. Maybe you can throw some light on this.

karthik

Hi Karthik,
What you are missing out is the fact that for every FII there are perhaps of hundreds or thousands of retail investors who are potential sellers.

So if u have a situation (due to sentiment ... or fear .. or panic, lets say) that amongst all retail longs, say >80% are desperate sellers at the same time, won't the market collapse ? (Aggregate holdings of those retail investors can add up to a lot, mind u )

Thus IMHO it would be somewhat simplistic to co-relate index movements to mere FII activity

AGILENT

 

[pkjha30]

Hi Karthik,
What you are missing out is the fact that for every FII there are perhaps of hundreds or thousands of retail investors who are potential sellers.

So if u have a situation (due to sentiment ... or fear .. or panic, lets say) that amongst all retail longs, say >80% are desperate sellers at the same time, won't the market collapse ? (Aggregate holdings of those retail investors can add up to a lot, mind u )

Thus IMHO it would be somewhat simplistic to co-relate index movements to mere FII activity

AGILENT

Hi agilent

It is called Domino Effect and quite natural to happen.If such drastic movements of indices were to be explained by TA indicators it would have been indicated by all analysts as imminent and not only by those who make money by shorting .
However it may not be a simple correlation but it does exist and in a demonstrable way.All indices movements are based on buy and sell activity. FII's are major player and it is quite natural that they will have that influence on the indices in absence of depth in our stock market.
Regards
Pankaj

 

[Agilent]

PK/Karthik

What would certainly help in this analysis is some idea of FII volumes as a percentage of total volumes over a long enough period, say at least a month

Would anyone have some numbers, even ballpark?

AGILENT