Indian markets up - DIIs deploying cash
Amidst all the doom & gloom worldwide (Nikkei down 5%, FTSE down 2%, oil down 4%, god knows what next in the US), the Indian markets closed up for the day, after gapping down 3.5% in the morning!
Someone is fairly bullish & voting with their wallets. Assuming the retail investor is still not quite recovered from the year-to-date ‘correction’, the place to look is DII & FII flows. Sure enough, it’s the DIIs who have been bullish over the past few weeks:
I’m not sure if this is because they believe in the great Indian growth story (despite 8% EPS growth last quarter), or if it is a case of having too much cash on hand looking for a home. After all, if the markets drop another 10% from here on, there are no real repercussions for mutual fund managers, are there? The retail sheep will continue to plow money in, without too much attention to absolute (heck, even relative) performance. On the other hand, if the indices keep going up and some MFs haven’t deployed cash, they’ll lag the herd as well as the index. Asymmetric!
The FIIs on the other hand are too busy selling everything in sight - see the rupee @ 47 now! They have bigger issues in life, such as CDS, FNM, FRE, M2M, AIG, LEH, MBS, [insert favorite 3-letter acronym here], …
PS: On a somewhat related note, ICICI ended down 5% (down almost 10% intraday) while SBI & Axis Bank closed up ~ 7%. I imagine that a few folks doing pairs trading (with 3-5x leverage) got their a$$ handed to them today.
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