The Hindu Business Line : FIIs’ buying lifts companies’ share prices: Study

Mr Kishor Ostwal, Managing Director of CNI, told Business Line that in terms of selling during the quarter by the FIIs, no such correlation could be established as the study results were erratic and a pattern was absent.

“We could not apply the same observations in such cases where FIIs sold. In other words, stock prices did not necessarily follow FII selling during the second quarter of this fiscal.”

CNI has found out that in 93 per cent cases, or 150 companies out of 161, there were rise in prices when FII stake rose by not more than 2 per cent in the last quarter. Where the stake rose by 5 per cent, the rise was found in over 80 per cent of the cases. For a 10 per cent stake rise in a quarter, the price appreciation was seen in 86 per cent of the companies.

In cases where the stake rise amounted to over 10 per cent, price response was certain.

That means in all such cases price invariably appreciated without an exception.

Sensitivity

CNI did not run a similar study for the first quarter (April-June) as market moved upwards and the probability of getting a correct co-relationship or assessment of price sensitivity to FII actions was dim.

“But we had done a similar study for January-March quarter (Q4 of 2008-09) in which the market took a U-turn. We had found out that where FII buying was there prices rose in many of such cases. As in that quarter the recovery started late (as late as March 17) the results are not fully comparable with that of Q2 of 2009-10.”

The January-March quarter study had shown that FII buying influenced the prices positively in 44 per cent of stocks. “Even in case of selling by FIIs, there were price appreciations but at a much lesser rate,” Mr Ostwal said.

For example, in cases where FII holding after selling in the quarter went below 5 per cent, the appreciation was seen in 29 per cent of the stock.

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