| FIIs shifting to Singapore
BS Reporter / Mumbai June 20, 2008, 0:52 IST
Equities worth Rs 79,526 cr sold in India since October.
Foreign institutional investors have sold equities worth Rs 79,526 crore
in the Indian markets since October as a series of regulations,
including curbs on investments through participatory notes (P-notes) and
turmoil in the domestic financial markets have made investments in India
less attractive.
While the circular on P-notes is just one among several reasons for this
heavy selling, at least some of the entities, which have unwound their
positions in the Indian markets, have taken positions in the Singapore
Exchange CNX Nifty futures, say experts.
Interestingly, the volume of trading in the Nifty futures shifting to
the Singapore Exchange has gone up in the same period. The share of SGX
Nifty, as a percentage of the total Nifty futures OI, rose from 5.6 per
cent to 8 per cent immediately after the P-note curb and stood at a
robust 31.5 per cent till April, a recent report by Edelweiss said.
"P-note holders, who have unwound their positions in the Indian markets,
have taken fresh positions in the SGX CNX Nifty futures till the time
they get registered as FIIs with Sebi. The transaction cost is also high
especially for FIIs who run a long-short P-note book... These FIIs can
roll over their Nifty positions at SGX or Nifty but they prefer SGX
because of lower costs," said Yogesh Radke, research analyst at
Edelweiss Capital. SGX Nifty transaction cost is as low as 2-3 basis
points in the absence of the securities transaction tax.
FIIs trimmed their holding in the BSE 500 companies by nearly two
percentage points to 17.8 per cent, bringing it back to June 2005
levels, according to a recent Citigroup report.
Domestic institutional investors (DIIs) have been buyers of equities
worth Rs 56,448 crore in the same period. The data compiled by exchanges
includes buying and selling transactions in the secondary markets as
also block deals.
According to Sebi data, FIIs have sold equities worth Rs 25,054 crore in
the cash market. The Sebi data considers all investments, which include
FCCB conversions, investments in ADR/GDR and secondary market transactions.
In October last year, Sebi had restricted P-notes investments in the
derivatives market, asking the investors to unwind their positions
within 18 months. At the same time, the regulator permitted P-notes
investment in the cash market up to 40 per cent of the FIIs' assets
under custody. Experts said that part of it may be attributed to the
Sebi's clampdown on P-notes.
"/Nearly eight months have gone by since the P-note circular was brought
out by Sebi. The markets are yet to see a lot of unwinding of positions
which will happen in the next 10 months. This will definitely not help
the markets," said the research head of a domestic broking house, who
did not wish to be named.../
However, there are differing views on this with some market participants
feeling that the fundamental picture has changed for the Indian economy,
thanks to soaring crude oil prices and a growing fiscal deficit, which
have bothered FIIs. |
