FIIs fear further redemption pressure

MUMBAI/NEW DELHI, June 10: Foreign institutional investors FIIs are extremely worried over the recent fall in the Japanese currencies vis-...

MUMBAI/NEW DELHI, June 10: Foreign institutional investors FIIs are extremely worried over the recent fall in the Japanese currencies vis-a-vis the US greenback and fear that any move by China to devalue its currency would lead to an intense redemption pressure 8212; selling stocks to repay investors on maturity abroad 8212; on them in India. Some analysts fear the South-east Asian bear8217; has finally caught up with the Indian markets.

As FIIs continue to get out of India lock, stock and barrel due to a weakening Indian currency, they say they are keeping a close watch on the entire Asian region. quot;The fall of the rupee coupled with the budget8217;s failure to give any impetus to the capital markets have made the FIIs really nervous about India8230; the market at this moment looks very attractive and is offering huge values, but the fall and the volatility is so huge that it is better to stay away,quot; said an FII analyst.

Sources say the FIIs had sold heavily after the nukes were tested but were subsequently told towait for the budget. 8220;However, since the budget has proved to be a disappointment, FIIs have continued to sell,8221; he added. FIIs pulled out 129.1 million Rs 510 crore in the first week of June 1-5 by selling shares in the Indian markets. As a result, cumulative net investment by FIIs fell below the 9 billion mark to 8.906 billion.

8220;It is not clear where the market will go from the level of 3311 but immediately it looks bleak. If the situation is as bad as it is being made out, the sensex can fall by another 200 to 300 points,8221; says P Singaharavelu at First India AMC. 8220;The FIIs are cutting down exposure to India as they expect the rupee to touch a level of Rs 45 and then enter the Indian market once the currency stabilises,8221; adds a Mumbai-based broker.

8220;What FIIs look for is political stability but with nuclear tests by India and Pakistan, this region is the new flashpoint in the world and hence, the volatility is driving away the foreign investors,8221; says a top FII source.