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Charts & Analysis

FIIs Sell In August As Well, now -7,700 cr.

FIIs continue to be sellers in August, though in smaller quantities (till now). A quick chart:

Net Monthly FII Investment

(Source: SEBI)

This is data till Wednesday. Thursday data will come in later today but it looks like they sold over 1,000 cr. of equities (cash) yesterday.

In August, they’ve sold about 7,000 cr. in total, nearly 80% of it in debt alone.

FII Trades in August 2013

The dollar, though has declined substantially, touching 65.

I have always maintained that we have such a weak current account, that it doesn’t need large sales by FIIs to break the rupee. All we need is for the investment inflows to stop. And that was absolutely right – even as they slow down their sales, the dollar has depreciated faster because structurally we are in very bad shape.

Depending on investment inflows is okay for a while – so ECB, FCCB etc. are good. But we must use that money to build products the world wants, or even that India wants – so that we either can export more or use locally made products, both of which are a better “flow” metric than investment flows.

The fact that we haven’t done that has made even investment flows stop and now, reverse. Given that any promise today is hollow as there are elections in a few months, I don’t expect inflows to increase. And then, the slow train wreck of our current account deficit will hit us, piece by piece, every day in dollar depreciation, until we get capital controls. (That is the worst thing we can do, but we’ll do it because someone wants to be known for doing *something*).

  • Niftytrader says:

    type dollar 65…we will not see 55 anytime soon unless we see a dollar collapse… 😉

  • Iceberg says:

    So the rupee fall has taken you by surprise also, its not at 55, its at 65. Kind of like when after a new year we still keep writing the old year on dates by mistake.

  • Sanjeev B says:

    So can we now ask if the 8% growth story is just that, a story? Did we register 8% because the rupee was kept high, and was the rupee kept high because of monetary tweaking, interest rate management, bond sales, dollar purchase and other tools of RBI intervention? And price control on oil to hold down inflation so that the rupee looks good?
    If these mechanisms of borrowing from the future were not there, would the rupee have gone down earlier and more gradually? And then would we have 4% growth instead of 8%?
    Given the bigger picture, it seems comical that economists were splitting hairs on whether the growth is 6.5% or 7.5%.

  • siddhant says:

    Deepakji,
    Is there another big problem coming in India about the Fertilizers.We are mostly dependent on imports for fertilizers, however the fertilizer demand is normally concentrated in 3-4 months after monsoosn which is now, considering how the supply china works indina fertlizer companies must have started builing stocks around 2 months before resulting in start of payments somewhere in next month. I personally believe that can put abig hole in the Forex as the requirement will come up bunched up in next 3-4 months for most of the year. so we have yet to see the worst days i guess……