Swadeshi Budget: Fiis Prefer To Quit India

Some leading foreign institutional investors (FIIs) seem to have decided to call for a `Quit India' movement in response to the government decision to place in `swadeshi budget'.

Reliable sources have indicated that two of the largest FIIs have decided to reduce their India weightages in their portfolios.

These two FIIs put together have an exposure of over $400 million in the Indian markets.

Sources further indicate that during the first three days of the week, the FIIs have sold shares worth Rs 400 crore in the Indian markets.

A research report prepared by Jardine Fleming has recommended sell at Telco, M&M, ITC and Ranbaxy, while it has recommended a buy at counters such as L&T, BHEL, HDFC, HPCL, BPCL, Hindalco, Nalco, SBI and IPCL.

In its report, Jardine Fleming broking has said that the across-the-board import duty hike does provide respite to some domestic industries, especially ones which are facing competition from cheaper imports such as iron and steel, petrochemicals and non-ferrous metals. The benefit, of course, would depend on the industry's ability to increase product prices.

Yesterday the markets recovered towards the close mainly on reports that the finance ministry is expected to announce buy-back of shares shortly.

This improved the sentiments and operators got into the act and pushed the stock prices up once again.

Meanwhile, the heavy FII sell-off at the forntline stocks continued unabated.

Market sources indicate that among the prominent sellers during the past two days include Templeton and Schroders. During the past two trading sessions, Templeton alone sold over four lakh shares of Cochin Refinery, over lakh shares of Arvind Mill, 11 lakhs shares of Sterlite.

Yesterday, Morgan Stanley Asset Management is reported to have sold 18 lakh shares of SBI in the range of Rs 230-215. The stock crashed to the day's low of Rs 207.90 on the BSE. Morgan is also reported to have sold over 40,000 Hero Honda, a stock which is considered to be dear to the fund.

The stock dipped to the day's low of Rs 941 on the BSE before closing higher at Rs 972.75, a marginal drop of Rs five.

A day after Telco announced it results, the stock came tumbling. This follows a bleak picture projected by the company officials in the analysts meet held on Tuesday. The stock took a beating on both the bourses yesterday. On the BSE, it touched a new 52-week low of Rs 209.20 before closing at Rs 218.20.

Watch the GDRs

Market sources indicated that the premium enjoyed by Indian GDRs will be a good indicator of whether the foreign funds have turned bullish or not. The logic seems simple.

The ITC GDR was quoting at $16.5 yesterday, which in Indian currency turns out to be Rs 688.

Yesterday, the stock closed at Rs 663.75 on the BSE. The ITC GDR was quoting at a premium of 55 per cent just a few months ago, which has come down to three per cent. Thus market sources say that if the FIIs have to buy any of the Indian paper under these circumstances, then it will prefer the GDRs.

For one, the GDRs will make the FIIs immune to currency risk. Hence, once the GDR premiums start moving up, one can safely say that there is a turnaround in the sentiment.

An update on ITC

Yesterday we indicated in Street Signs that one operator will not abandon the ITC stock. We learn that the operator still holds close to 20 lakh shares and short-sold backed with these stocks.

When the stock went down tumbling, he covered up his position and made money in the process.

Thus, it was a win-win situation for him. In a major reversal, the stock yesterday edged up and closed at the day's high of Rs 663.75. The operator seems to have kept his promise.