Falling FII Inflows Cause A Flutter

Updated: Nov 16 2003, 05:30am hrs
Key indices of the domestic markets ended the week with losses, as traders were forced to liquidate overbought positions in the futures & options (F&O) segment, after the National Stock Exchange (NSE) stepped up its risk management measures.

The NSE raised exposure margins in 38 scrips last week, which included many frontline stocks. On November 13, the exchange also slapped ad-hoc additional margins on brokers with large exposures in the futures & options segment.

The gross exposure margins slapped on select brokers by NSE authorities took a heavy toll on arbitrageurs over the last two trading sessions of the week. The risk management measures were stepped up as arbitrageurs have made the most of the current bull run by taking advantage of the increasing price difference between the cash market and the derivatives segment of the bourse.

However, the broader market witnessed a lot of buying for the initial half of the week. The BSEs 30-share Sensex closed 59.81 points or 1.2 per cent lower at 4,911.76.

Dealers from the domestic brokerage houses also attributed this weakness to growing concerns over dwindling foreign institutional inflow, as the current calendar year draws to a close. Foreign institutional investors were net buyers in equities to the tune of Rs 804 crore or $177.2 million this week (till November 13) as compared to Rs 1,570.8 crore or $343.6 million last week-ended November 7.

The composition of the Sensex underwent a change on November 10, with Bharti Tele-Ventures, Tata Power, Oil and Natural Gas Corporation (ONGC), Wipro Ltd and HDFC Bank making its way into the index. The stocks, which made way for them, were Castrol, GlaxoSmithKline, Colgate, Nestle and HCL Technologies.

Bharti Tele-Ventures gained ground on reports that the Cabinet is expected to take up the issue of raising the foreign direct investment (FDI) limit in the telecom sector to 74 per cent from the present 49 per cent, immediately after the state elections.

Reliance Industries and Tata Teleservices also looked up during the early half of the week, after the department of telecommunications (DoT) issued guidelines for unified licensing, which paves the way for companies to go fully mobile.

However, DoTs decision to put on hold Tata Teleservicess application for seven new basic services licences, under the unified access regime came as a dampener to the counter.

Sterlite Industries witnessed hectic activity at the bourses after its holding company Vedanta Resources, announced its plans to make its debut on the London Stock Exchange (LSE), by mid December, with a $700 million issue.