FIIs top the trading charts :: Business Line

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Stock markets may have been trading sideways over the past few months, but the underlying dynamics have been anything but that. A look at the category-wise turnover that's made available by the BSE reveals a sea-change in the trends in market turnover of the different categories of investors. Here are some of the interesting findings:

FII STRANGLEHOLD REMAINS

FIIs may not be buying into Indian markets to the extent they had in the past, but that hasn't affected their stranglehold here. Despite lower inflows, their influence in the domestic markets has only increased. For instance, as a percentage of the total gross buys and sells made in the market, FII buys and sells make up about 41 per cent and 44 per cent share presently (as of May 2011) as against 39 per cent and 44 per cent seen in January 2011. Interestingly, their contribution to total gross purchase and sale was much lower at about 32 per cent and 38 per cent in May 2010 and still lower at 31 per cent and 34 per cent in May 2008. Note that this has been despite an absolute fall in gross buys and sales made by FIIs over the last few years.

RETAIL LOSING INTEREST

The rise in FII influence, however, has largely been helped by the drastic fall in trading interest among retail investors, as represented by orders executed under the ‘client-type' category in the BSE. While retail interest was high in 2007, when markets had peaked, and in some months in 2009 when they had begun rallying again, their participation has reduced over the years. For instance, from 41 per cent and 42 per cent share in market-wide gross buys and sells in May 2008, their contribution has come down drastically to 30 per cent each in May 2011. In absolute terms, gross purchase and sales have come down from Rs 79,114 crore and Rs 79,425 crore respectively in May 2008 to Rs 39,453 crore and Rs 39,751 crore respectively in May 2011. The trend in the five-months to May 2011, however, has shown a mild reversal, with increased participation seen in March and April 2011.

An interesting sidelight here is that this lacklustre participation of retail investors has negatively impacted the business dynamics of stock-broking companies. As a result, their share prices have taken a beating over the past year. Separately, even the share of proprietary trades (trades put through by brokers on their own books) has come down in recent times. From about 14 per cent each in May 2008, the share of proprietary trades in overall gross purchases and sales has come down to about 9.5 per cent each in May 2011. It, however, merits note here that the fall in share has been more pronounced only in the last one year.

DIIS MAINTAIN STATUS QUO

The course charted by domestic institutional investors (DIIs, as represented by banks, insurance companies, and mutual funds) has remained more or less the same. In absolute terms, there hasn't been much of a change in gross purchases and sales. For instance, gross purchase and sales were pegged at about Rs 26,254 crore and Rs 17,976 crore respectively in May 2008; about Rs 27,344 crore and Rs 27,427 crore in May 2009; Rs 29,971 crore and Rs 23,610 crore in May 2010 to Rs 25,090 crore and Rs 20,997 crore respectively in May 2011. In terms of overall turnover percentages, DII share is now about 19 per cent (of total purchases) and 16 per cent (of total sales). It hovered at about 13.7 per cent and 9.4 per cent in May 2008