Historic FII sales on Wednesday

NetScribes/Salil Panchal

The stock markets have been gripped with uncertainty following reports of a historic selling by foreign institutional investors at the local markets. On Thursday evening, the Securities and Exchange Board of India disclosed Wednesday's net FII sales at Rs 5.09 billion (gross purchases of Rs 2.16 billion and gross sales of Rs 7.25 billion).

A large section of the market was shell-shocked. This is because the FII sales registered by SEBI would be probably the largest single-day sale on the Indian stock markets. A dealer at a foreign brokerage says, "If the figures were true and confirmed, it would have triggered off panic selling at the bourses on Thursday."

There are two explanations doing the rounds -- either there is an error in SEBI's reporting or there has been warehousing.

A section of the market is questioning the validity of the figures, suggesting that errors might have crept into SEBI's number while recording the FII figures. This has happened in the past. Senior SEBI officials were unavailable to confirm the figures.

The second explanation seems more plausible according to sources. For such large sales to have taken place, corresponding buying would have taken place at the momentum counters by domestic players, which has also not happened. So players attribute it to warehousing transactions (where the sales get registered with SEBI but not the purchases). The buyers have time till Tuesday (the last day of the settlement on the National Stock Exchange) to report the purchases.

According to Abhay Aima, head of equities, HDFC Bank, the FII sales could be justified as outstanding positions have risen at the markets by an overall Rs 6 billion since last Friday. But he also thinks that warehousing of stocks might have taken place, which would be reflected later from the regulatory end.

Most market players are not too concerned about the market falling much on Friday. But Navin Agrawal, chief dealer, SVS Securities, a leading institutional brokerage feels the markets would open weak on Friday and slide 100 points during early morning trades. "The impact of the sales have not been reflected at the markets," he says.

Money

Market Trends

Tell us what you think of this report