FII’s were the main force behind the previous bull market when they invested billions of dollars in the Indian market. And now they are the main force for this bear market as they are already net sellers of 10,700cr in the current year with a net sell of 2800cr in the current month & still they are sitting on a huge selling. Now just take a look what are the major factors which drove this huge sell-out.

Major Factors:

1)      Lower GDP data & worsening fiscal situation of the country, the highly uncertainties related to general elections.

2)      The depreciation in the value of Indian rupee against US dollar which is at life-time low. This further put pressure on FII to sell their holding which in turn put pressure in the currency.

3)      Various institutional reports clearly show that in India we will see additional billions of dollar outflows by Asian funds from now in the second quarter.”

4)      Many funds are facing further mark-to-market losses on their portfolios and need to produce cash to give for such losses. This forced them for further selling. Citi group estimates that sell-offs by Asian funds during September and October last year was to the tune of 6.3 per cent of their holdings and, in the last three weeks alone, outflow has reached 2.9 per cent of their total holdings left in the region

When they will return?

FII Inflows mainly depend on the growth of the country or say on various micro-economic numbers say IIP or data of Auto sales, Inflation and all. Most of the parameters mainly depend on Government policy & stability of the government so we can say that in India market will depend a lot on the election which will provide further direction to the market and also it will decide the FII flow accordingly.

As far as GDP growth is concern we firmly believe that India won’t achieve GDP growth of 7-7.5%. Mainly it will swing between 3-5.5% till first quarter of 2010 or say last quarter of year 2009. So till that we can’t expect positive flow from FII on a monthly basis.

Which kind of investment portfolio one should adopt?

Even though negative outlook of equity market, we believe that it will give best opportunities for investments and also it will give 50-60% return if you picks up correct script on correct time. Do not invest in this market for the time period of say one-two year. Invest only for two month horizon. It’s better to do trading in the “A” group shares & book profit @ every rise. So be cautious and enjoy trading as bear market is good for Traders, not for investors.