8/8/2019 It is All About Sentiments
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As on Debt Equity Debt Equity
March' 06 151 45108
March' 07 1384 50582 1233 5474 6707 43.44
Dec' 07 3625 66329 2241 15747 17988 39.44
Jan' 08 4110 63098 485 -3231 -2746 39.39
March' 08 4511 63495 401 397 798 39.90
April' 08 4089 63761 -422 2 66 -156 40.38
May' 08 4048 62519 -41 -1242 -1283 42.53
June' 08 3801 60016 -247 -2503 -2750 42.85
July'08 4698 59561 897 -455 442 42.47
August' 08 5010 59261 312 -300 12 43.92
Sept 23, 2008 5756 57695 746 -1566 -820 45.39
Figures in US $ million
Net Investment by FIIs
Increase
decrease over
previous period
Net flow with
respect to
previous
period
Exchange Rate
(Rs / US $)
Source - FII data - Sebi website & exchange Rates -
http://www.oanda.com/convert/fxhistory (Interbank rates)
...it is all about sentiments the real cause behind fall in
Rupee
Just look at the following statements that have appeared so many
times in news papers, magazines,
television etc:
...........................Major cause for falling Rupee is
outflow of US dollars
......................FIIs selling in equity markets pulling
Rupee further down
..........................................................Dollar
flying out Rupee tumbles
Now take a look at the real data
in the table. Yes, it is correct that
the FIIs are selling in the equity
markets but simultaneously they
are also investing more in the
debt markets. The net outflow of
US $ on account of FIIs have been
around US $ 820 million in
September 08 (till 23rd). Compare
this to the net outflow in May
and June 08, the net outflow in May08 was US $ 1283 million and
in June was a whopping US $
2750 million. The exchange rate was then at Rs 43/dollar levels
and continued at those levels till
August 08 then why suddenly in September 08 the Rupee has
dropped so much. How can we forget
the bloodbath in Indian stock markets in January08 when the
markets fell heavily after reaching alltime highs, the main cause
of this fall in the stock market was also heavy selling by FIIs and
then the
net outgo of US dollars on account of FIIs was US $ 2746 million
but Rupee stood straight against
Dollar at around 39.40 levels for quite some time even after
that.
So.......the MAIN reason is not FIIs selling...it is just
negative sentiments.... everyone talking about
FIIs selling, Dollar flying out, subprime crisis, fallout of
Lehman etc. and the weak sentiments cause a
panic in the markets which is the real cause of this
outflow.
Disclaimer:
The views expressed in the article are the authors personal
views.
About author:
Naresh Goyal and he may be contacted at
[email protected].
