The Hindu Business Line : FII selling drives down stock prices for 3rd day

Stocks declined for the third straight day as foreign institutional investor (FII) selling continued following the Securities and Exchange Board of India’s proposals on participatory notes.

Trade was choppy on Friday with the Sensex dipping by more than 800 points intra-day, later crawling back again to close at 17559.98, 2.44 per cent lower from Thursday.

Market players said they expected the volatility to continue till SEBI’s measures on P-notes are decisively laid out.

“The measures seem likely to go through, what with the CPI(M), saying today that participatory notes should be prohibited and that SEBI’s proposals are half-hearted,” said the head of a broking firm.

Given how the opinion of the Left parties prevailed in their disagreement with the Congress over the Indo-US nuclear agreement, no one is taking this view lightly, he added.

Although unwinding by FIIs is happening and continues to lead the market southwards, selective buying in some counters by genuine buyers can be observed, said some brokers.

“The Tsunami is over, though we will continue to see the ripple effects till the D-Day,” said Mr Raamdeo Agrawal, head of Motilal Oswal Financial Services.

The D-day is October 25, when the SEBI Board meets to consider the feedback on its P-notes proposals; that date is also the settlement date when futures contracts for October have to be squared off.

“We see not only some domestic funds but also some foreign mutual funds buying,” said Mr Agrawal. “And the fundamentals are strong. We have seen some good results coming in from RIL, from Bajaj Auto and so on.”

“Short-term investments by FIIs were pushing up the market so far,” said Mr Devendra Nevgi, CEO, Quantum Mutual Fund. “Now only those FIIs who want to get in for the longer term will be attracted to the markets. Till then, the market will have to bear the pain.”

FIIs were net sellers for Rs 1,750 crore on the BSE and the NSE, provisional figures showed. FIIs were net buyers for Rs 189.26 crore.