There is a tendency among Indian investors to portray FIIs as villains. There is a general belief that FIIs benefited when Indian stock markets scaled new peaks last year and when the markets started falling, FIIs made a timely exit - leaving the Indian retail investors high and dry. I have been wondering how true it is and now I have the answer.
The Economic Times, the most widely read Indian business daily, carried an interesting article:
“Foreign institutional investors (FIIs) have played a major role in pushing up the index and pulling it down, hurting themselves in the process.
During the ride of the sensex from 10,082 points on February 7, 2006 to 20,582 points on January 10, 2008, FIIs had made a net purchase worth Rs 1,00,951 crore (close to 22 billion USD). During this period, the FIIs provided the required liquidity and the cues for others to follow.
FIIs' net off-loading was to the tune of Rs 47,299 crore (close to 11 billion USD), dragging down the sensex from 20,582 points to 9,975 points”
This clearly shows that FIIs could not make a clean and complete exit and have, along with Indian investors, burnt their fingers getting carried away by the euphoria caused by the Fed’s slashing of benchmark rate in September 2007.
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