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FII Investments – Any leading indicators?

I mapped all FII investment data, (net daily, since 2006, when it’s been made available) from the NSE Web site to check if FII data had any leading indicator of market moves.

I’ve plotted 20 day and 120 day cumulative totals of the “net” investment by FIIs (right axis) and the Nifty (left axis). There’s not much correlation on the upside – in fact the FIIs seem to flatten out as the moves get really strong. But on the downside it’s apparent that FIIs yank out money. They invest when things are “stable”.

In a few cases above – Jan 2008 and Oct 2008 – it has been seen that FIIs have pulled out money before the crashes, as evidenced by the fall in the cumulatives just before the crashes. But that hasn’t happened in the mini-crashes of March 2007 and Oct 2007 (their taking out money coincided with the market crash, but did not precede it).

It’s too little data to make a prediction but it appears that FIIs 20 day cumulative figures don’t usually stay above zero for too long. The last two months though, it has stayed above zero, as is at 10000 cr. now. Let’s see where it goes.

  • Technovestor says:

    >very nice analysis, deepak. this may be a really short period, but still gives some insights. 8-10 k crore would be just about 2 Bn $, dont you think its a fairly small fraction of the total investments FIIs would be making in worldwide markets, i believe. Where does bulk of the money go, you think.

  • Ak says:

    >Hi Deepak,

    Looks like the 20 day moving avg has gone negative, time to short ?