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FIIs go in selling spree to raise funds

Our Bureau

MUMBAI, Sept. 14

FEARS of a further meltdown in the equity market in the coming days and the impending US retaliatory action forced foreign institutional investors (FIIs) today to encash a large part of their holding.

According to dealers, a prominent FII, Morgan Stanley sold off shares worth Rs 300 crore on Friday. Many other followed suit, pulling stock prices to 157 down on Bombay Stock Exchange.

Morgan Stanley suffered huge damages in the crash of World Trade Center where it had a large infrastructure.

``There are two reasons for the heavy selling, one is the war-like situation that is fast emerging and the second is the anticipation of a depressed market when New York Stock Exchange and Nasdaq open on Monday,'' said an FII official.

Dealers said there is panic selling by FIIs in the market. FIIs were converting their equity into debt. ``Investors are waiting for Nasdaq and NYSE markets to react to the situation and are expecting both markets to plunge,'' said an analyst.

Although analysts and dealers say this is a knee-jerk reaction to the attacks by terrorists in the US, there are other theories doing the rounds in the market.

Mr John Band, Chief Executive Officer, ASK-Raymond and Associates Ltd, said, ``Prior to the current developments, there were basically two parties, for instance, Singapore was one of the main seller of equity and US the buyer. Due to these extraordinary circumstances, the US has not been a party at all, hence there is a gulf. Since there are only a couple of sellers from the Far Eastern countries, the market has remained depressed.''.

But the outlook for next week doesn't look very bleak. An official from DSP Merrill Lynch said, ``Asian markets have recovered after a massive fall but comparatively the Indian financial markets have been relatively optimistic. There is a rebalancing of portfolios by FIIs at the moment and hence, the sell off. India financial markets are now expected to remain flat ahead of the opening of the US markets.''

Pic.: Stock brokers in Mumbai watch in dismay as the Sensex continuing its downward trend on Friday.

Picture by Paul Noronha