FIIs’ net selling stands at Rs 8,558 cr this month

After pumping in about Rs 24,000 crore or $5.8 billion during July, foreign institutional investors turned bearish in August as they were net sellers to the tune of Rs 8,558 crore, according to data available on SEBI Web site. If one considers the provisional figure of FII data on the exchange, then their net selling stands at Rs 13,243 crore. FII data is on the basis of trades executed by them on the BSE and the NSE.

On the other hand, domestic institutions remained net buyers to the tune of Rs 7,473 crore and retail investors at Rs 1,808 crore, according to the data provided by the Bombay Stock Exchange.

Among the FIIs, Morgan Stanley, Merrill Lynch and Deutsche Bank did major selling in August, as per bulk/block deals data available on the BSE site.
Cherry-picking

Despite heavy selling, select FIIs also indulged in cherry picking. Merrill Lynch bought Nagarjuna Fertilizer while Morgan Stanley purchased Apollo Hospitals and House of Pearl Fashion. Citigroup Global Markets bought Punj Lloyd.

On the other hand, Merrill Lynch sold stocks such as Shah Alloys and Alembic Ltd; Merrill Lynch and Macquarie Bank sold shares of Dredging Corporation while Macquarie Bank sold UTV Software as well. Bear Stearns & Co sold 0.03 per cent of their holding in Bharati Shipyard.

“The short-term concerns are the global US sub-prime problem, there was some element of buying and selling across sectors but in the long term the growth story looks intact”, said Mr Alok Vajpeyi, Vice-Chairman & Managing Director, DawnayDay.

“The most important short-term concern is that these sellers were the highest buyers in July and in August they turned net sellers and this is worrisome; secondly, when the global markets are in a mess, FIIs attention gets diverted and they have to sell here so that they can salvage their position in the global markets,” said Mr Arun Kejriwal, Director of Kejriwal Research & Information Services.
Less hedging in F&O

In the F&O sector, the FIIs were net buyers to the tune fo Rs 3,197.61 crore. However, their open interest holding in index futures dipped to 7,42,007 contracts as against the August 1 figure of 8,37,715 contracts; on the other hand, in stock futures their open interest improved to 9,88,763 contracts as against 8,83,983 contracts on August 1. Even when their open positions improved on stock futures, their holding dipped on amount-wise as they hold Rs 26,768.42 crore against August 1 figure of Rs 26,992 crore.

“There was high volatility and the FIIs sold in cash market so there was less need to hedge and the drop in open interest holding in index futures reflects that,” said Mr V.K Sharma, Head of Research, Anagram Stockbroking.