Foreign investors might opt for profit booking or their investments could slow down at least for next couple of weeks, going by what the global fund managers are thinking. Foreign institutional investments (FIIs) have already slowed down in April. Global fund managers have increased the underweight level for the Indian market to the average of November, December and January levels.
According to the BofA (Bank of America)-Merrill Lynch Survey of Fund Managers in April, emerging market fund managers are underweight on India by 40 per cent against nearly 25 per cent in March.
Study of past six months’ surveys reveal that since November FIIs have been underweight on India, though its level kept on changing. Fund managers have increased overweight of Brazil and Thailand, and Russia still commands heavy overweight despite some lowering of overweight in April, according to the survey.
BofA Merrill Lynch Survey of Fund Managers is regarded reliable by many as an average of 160 fund managers participate in surveys covering global emerging markets. They also manage assets worth $350-400 billion in the region.
These funds managers were underweight between November and January, the level of it being between 35 and 45 per cent. In the secondary capital market, i.e. on stock exchanges, they were either net sellers or their net buying was minimal depending on individual FII’s calls. The FIIs were rather seen putting more money in debt.
In March, the fund managers reduced India’s underweight to almost third from nearly 60 per cent in February. Sentiment in March improved because of Budget announcements, which gave confidence to the market that the government would withdraw stimulus without compromising on growth and its borrowing programme could be under control.
This comfort brought in $3.32 billion of investment through net buying on exchanges and $6.5 billion in capital markets, including primary market investments.
| NUMBER GAME | |||
| (Rs crore) Date | Sebi (FII Net) | BSE/NSE FII Net | |
| Equity | Debt | ||
| Nov 2009 | 5,469.20 | 541.69 | 1,708.07 |
| Dec 2009 | 10,367.30 | -1,434.00 | 4,240.86 |
| Jan 2010 | -1,137.00 | 8,805.00 | -7,216.67 |
| Feb 2010 | 2,113.70 | 2,209.70 | -1,971.92 |
| Mar 2010 | 18,833.10 | 10,137.00 | 14,792.33 |
| Apr 2010* | 5,063.90 | 318.60 | 2,254.17 |
| *For April 1-15 | |||
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Fund managers’ views have already started getting reflected in the market. Against a robust investment figures in March, foreign portfolio investments in April on stock exchanges have slowed down as they were net buyers of shares worth $500 million. Total investments, including in primary issues and debt in April so far is $1.2 billion.
Fund managers views shall get further reflected in the market in the coming days. Ground reality is that the Indian market is no more cheap and raises risk apprehensions.
Kaushik Dani, head–equity, Peerless Mutual Fund, said: “Currently the markets are trading at close to 16.5 times FY11 Sensex earnings. So, they are trading at a premium of around 15 per cent to the long term average. This is not cheap and markets should face resistance at higher levels.”
An analyst with Barclays Capital, Rahul Bajoria, sees red. He said, “We believe inflation concerns are likely to remain elevated. The RBI is likely to continue normalising its interest rate policy by raising the repo and reverse repo rates by 50 basis points at the annual credit policy review on 20 April.”
Coming days for the market promise to be eventful as, apart from the monetary policy being announced on Tuesday, many market heavyweight companies’ results are expected. Apart from India, Philippines, Sri Lanka and Thailand central banks are meeting during the week to review their monetary policies. In fact, the week itself will begin with Goldman Sachs effect, which resulted in heavy selling across markets in the US on Friday evening.