FIIs have been net sellers in the last 2 months

Foreign institutional investors (FIIs) have turned net sellers of Indian shares in the last two months but domestic institutional buying, mainly from mutual funds, has helped sustain market levels.

The Indian equity market has witnessed a lacklustre 2005 so far, with the benchmark Bombay Stock Exchange (BSE) Sensex falling marginally.

The BSE Sensex has lost 0.20 per cent from 6679.20 on January 3, 2005 to 6663.55 on Monday. Incidentally the BSE sensex has grown 7.60 per cent in the last one month from 6195.15 on May 2, 2005, on strong fund buying.

Mutual funds had mobilised large amounts in the last six months and they were bound to have invested sometime in the market soon. The fall due to lack of buying from foreign funds helped the funds invest in the market, brokers said. But this could be a problem going forward, if FIIs continue to stay away from the market, they added.

"Our markets do not have the depth and FIIs are the major buyers. Fund buying has helped the market from falling so far but these institutions do not have the assets to support the market for very long," a research head at a broking house said. A changing global investment scenario has seen emerging markets like India suffer due to foreign fund outflows, analysts added.

Foreign institutional investors (FIIs) who were the major drivers of the rally in the last two years have turned net sellers to the tune of more than Rs 2,300 crore in the last two months while mutual funds have bought shares worth a net Rs 4,824 crore in the same period, data from the Securities and Exchange Board of India (Sebi) website show.

Coming after a long rally and a changing investment scenario, various sectors have also show a contrasting pattern.

A closer look at the sectoral indexes of the BSE shows that the BSE Capital Goods index has been the largest gainer in 2005 so far, up almost 20 per cent year to date, followed by the BSE Consumer Durables index, up 18.30 per cent and the BSE FMCG index has risen by 11.70 per cent.

The biggest loser in the BSE sectoral indexes is the pharma index, BSE Healthcare, down 12.30 per cent, followed by the BSE Metal index down 11.70 per cent.

Analysts said that in a rangebound and shallow market, volumes have been consistently lower off late, the market will see a lot of stock specific activity and churning. Besides, many sectors will also undergo a re-rating as a new investment pattern pans out, they added.