Good monsoon to attract foreign investors, should you track FIIs?

By: |
Updated: June 6, 2016 11:28:47 AM

Figures show FIIs have increased holdings in 14 companies in the Nifty 500 index in the previous four quarters and, surprisingly, all of them gave negative return!

FIIs Good monsoon to lure FIIS. The immediate past record or FII investment and returns generated by them Indian equities does not provide a promising picture. (Photo: Reuters)

A good monsoon as predicted would lure investors, including foreign institutional investors (FIIs) to the Indian equity market. But should you base your investment decision tracking what FIIs are doing?

The immediate past record or FII investment and returns generated by them Indian equities does not provide a promising picture. In fact, if you had followed foreign institutional investors (FIIs) favourites in the past year, you would have invariably lost money.

Figures show FIIs have increased holdings in 14 companies in the Nifty 500 index in the previous four quarters and, surprisingly, all of them gave negative return!

ACC in which foreign institutional investors were holding 11.19 per cent stake as on March 31, 2015 raised their stakes to 12.30 per cent, 13.65 per cent, 14.41 per cent and 14.66 per cent as on June 2016, September 2016, December 2016 and March 2016, respectively. However, the share price of the company slid 2.11 per cent since April 1, 2015. On the day, the share price of ACC was at Rs 1585.90 and it dipped to Rs 1552.40 on June 1, 2016.

Similarly, FIIs increased their stake in Tata Global Beverages (from 9.09 per cent to 13.14 per cent), Oil India (from 4.98 per cent to Rs 8.49 per cent), Reliance Capital (from 2.92 per cent to Rs 2.97 per cent). Shares of Tata Global, Oil India and Reliance Capital slid 21.87 per cent, 23.03 per cent and 6.92 per cent, respectively during April 1, 2015 and June 1, 2016.

Since April 1, 2015, Nifty 50 and Nifty 500 index also plunged 4.73 per cent and 3.47 per cent, respectively, till June 1, 2016.

G Chokkalingam, founder, Equinomics Research and Advisory said, “Foreign institutional investors call went wrong during this period in terms of expectation of revenue growth, hence most of them gave negative return during the previous four quarters.”

Overall, FIIs remained net sellers in the domestic equity markets as they offloaded shares worth Rs 14,171.38 crore in the previous financial year ended March 31, 2016. However, in April and May 2016, they bought shares worth Rs 10,958.62 crore.

On foreign investments, Chokkalingam said, “If there is no aggressive rate hike by the Federal Reserve in its upcoming monetary policy and monsoon in India remains as per expectations we could see strong FII inflows.”

Ruling out the possibility of a deficient monsoon, India Meteorological Department on Thursday said 96 per cent chances are that the rainfall this year would be normal to excess. Releasing the second long-range forecast, IMD Director General Laxman Singh Rathore said North-West India will receive 108 per cent rainfall of the Long Period Average while central India and southern peninsula will receive 113 per cent of LPA.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.