Friday, October 19, 2007

The stocks with the highest number of participatory notes (P-notes) were the worst hit during the market crash on Thursday on account of heavy unwinding of long positions by foreign institutional investors (FIIs).   On Thursday, the stocks of ICICI Bank, HDFC, SBI, Axis Bank, Indiabulls Financial, Jai Prakash Associates, Reliance Energy, Bharti Airtel, Asian Electronics and ACC saw FIIs unwinding their positions. These stocks have seen huge FII investment, mainly through the PN route.    AMBUSHED Scrips Loss (%) ACC 13.86 Indiabulls Financial 13.03 State Bank of India 8.26 Jai Prakash Associates 10.26 Asian Electronics 6.60 Reliance Energy 9.71 ICICI Bank 6.99 Axis Bank 1.95 HDFC 0.93 HDFC Bank 5.51   While the benchmark Sensex fell by nearly 4 per cent, stocks with the P-notes exposure fell by 5-13 per cent on Thursday.   Brokers point out that most of the hedge fund managers and FIIs want to play it safe before the regulatory policy on investment thought the PN route is clear.   Sources say even after liquidating their positions, mostly in derivatives markets, foreign players are unlikely to take their money out of the country until the guidelines are clear.   Deven Choksey, managing director, KR Choksey, said: “The FIIs seem to be going light on the Indian markets in the short run. Once the guidelines by the regulator are clear, it is likely that foreign fund houses would reinvest their money in the cash markets, if not in the derivative stocks.”   The Securities and Exchange Board of India (Sebi) on Tuesday, October 16, put forward a proposal that FIIs should not be allowed offshore derivative instruments (ODIs) linked to futures and options. With a view to limit the investment through the PN route, the stock market regulator on Tuesday had suggested a cap on the amount of PNs that can be issued by each broker. Savio Shetty, derivative analyst, Prabhudas Leeladhar, is of the view that the markets could be worst hit before the expiry of the November series of futures and options stocks.   “Before the expiry on the coming Thursday, it is likely that there may be unwinding of some long arbitrage positions too by the FIIs.” On the other hand, most of the information technology stocks witnessed short-covering of positions by FIIs, which was the reason for the scrips ending the day in the positive terrain.

More News.... Source:  Business Standard