FII Trend | Stocks and Commodities

February 16, 2016
Time: 7.30 am

FII Trend:

1. We always think big people are intelligent.
2. I do not know how far this is true in case of long only FIIs.
3. There are two types of FIIs. One, invest in shares, hedge using F&O, trade in F&O, short in F&O etc. Second, long only investors who invest in equity and do not trade in F&O.
4. We leave the first typr of FIIs and we consider only the second type of FIIs who are called 'Long only FIIs' who invest only in Cash market.
5. What I observed in the last many years, FIIs are always on the buy side when markets are at higher level and they are always on the sell side when the markets are lower.
6. For example, Nifty was trading around 9000 in March 2015, FIIs have invested more than 25000 crores in February, March and April 2015. (Source: FII buy sell figure in Cash market from moneycontrol.com)
7. But when markets are trading between 7500 and 6900 this year, they have sold for more than Rs 15000 crores this year Since January 1, 2016.
8. If we enter markets when Nifty is at 9000 and exit markets when Nifty is at 7000, we lose only 20%.
9. But FIIs lose much more as currency would have depreciated by 10% to 15% in the mean time.
10. So in dollar terms they lose more than 30%.
11. Since 2008 January, Nifty has gone up only by 10%. But Indian rupee has depreciated by 75%.
12. If any FII invested in Indian equities in January 2008, and held on to the investments until today, after 8 years, they would have lost 65% in dollar terms.
13. This is assuming that they have invested in large cap stocks and they have generated the average return of Nifty.
14. Otherwise, their return could have been more or less than 65% loss.
15. On the other hand, I always observe that DIIs enter the markets when markets are down and exit markets when markets are high.
16. 2015 was an exception for this when DIIs kept pumping in money even when markets were higher.
17. Bu yet Mutual funds have not given any better return to the investors.
18. People who invest when markets are low and exit when markets are high, mange to give only a mediocre return, what will be the return by FIIs who invest when markets are high and sell when markets are low?
19. Their cost funds is low and many of them do not pay tax (Anyway long term investors do not pay tax in India also) are the two factors to be considered.
20. Even considering these factors, I do not think long only FIIs are making any money in Indian markets.