Mkt returns no longer linked to FII inflows: NCAER

Stock market returns are no longer linked to the attitude of foreign institutional investors (FIIs) nor are they a reliable indicator of market
direction, economic think-tank National Council of Applied Economic
Research said in a report released today.

"In the past five months, Indian markets have displayed negative co-relation to FII attitude in direct contradiction to accepted wisdom," the report said.

During January-March 2005, FIIs invested Rs 16,600 crore and the market lost 1.7% while in April-May, FIIs pulled out roughly Rs 2,700 crore and the markets gained 3%.

NCAER said the impact of positive FII inflows in the first three months of 2005 was dampened by approximately one-third being deployed in various IPOs, and, perhaps, one-fifth more deployed in off-market deals.

"Neverthless, the negative correlation means that FII investment attitude is not a reliable indicator of market direction," it added.