By Kul Bhushan, IANS
NRI investors are sharp. They waste no time in picking up stocks when the prices are down on the Bombay Stock Exchange (BSE) — and sell them quickly when the prices move up. The short-term investors know the game of making money on the BSE.
An analysis of NRI investments published recently shows that NRIs are always on the lookout for sharp movements. So they doubled their equity investments in August as compared to July. The BSE Index, called Sensex, lost around a thousand points in four weeks during the July-August period as a result of the sub-prime crisis that broke out in the US and sent shock waves across the globe.
Any correction in the market attracts them and here was an opportunity to pick up equities at low prices. NRIs were quick to cash in this time as well. The BSE lost over 1,787 points between July 26 at 15,776 points and Aug 21 at 13,989 points.
This was a prime opportunity to enter the market for NRIs. They purchased shares worth almost Rs.7 crore ($1.7 million) in August. This is double the figure of around Rs.3 crore ($0.73 million) in July when the index gained about 900 points. After this peak, a decline has been noticed because the market started to recover from 13,989 points on Aug 21 to 14,993 points on Aug 29.
The same trend has been spotted in the past six months. In January, the Sensex gained over 300 points and NRI sold equities worth over Rs.2 crore ($0.487 million). As the index nose-dived over 1,000 points in February, they started buying in a big way and invested a whopping Rs.68 crore ($16.58 million).
In March, they purchased equities worth over Rs.76 crore ($18.53 million) and in April, as the index shot up over 800 points, they were offloading equities to the tune of almost Rs.25 crore ($6.097 million). In May and June, NRIs continued their selling spree.
This compares with an average sale or purchase of Rs.10 crore ($2.439 million) a month. In 2006, when the Sensex gained 4,300 points, the NRIs invested almost Rs.8 crore ($1.95 million). Their purchases in 2007 have rocketed 10 times, to almost Rs.80 crore ($19.51 million) so far.
The long-term NRI investors have a different approach. They stay invested because they know that the fundamentals of investments in India are rock solid. The economy is performing extremely well with over nine percent growth.
Although the Indian economy is now strongly linked to the global economy, it has the inherent resilience to stand up to any external shocks unless they have the intensity of a tsunami.
In addition, the financial system is also strong to withstand such shocks as the Reserve Bank of India has an eagle’s eye on all such developments. When the sub-prime crisis struck the Indian markets, a window of investing at low prices opened for a few days. NRIs took full advantage to reshuffle their portfolios for quality, high growth stocks.
“As we have witnessed in the recent past, when liquidity factors were driving global markets, markets could soon gain momentum, as liquidity is here to stay. And if the US were to increase its own liquidity to solve its own domestic concerns then liquidity is not only here to stay but also increase,” says Sanjay Durgan of AbunDanze.
“For the time being however, caution is advised as sub-prime worries, along with some domestic political concerns, is changing the risk profile of global investors, resulting in flight of capital to less risky asset classes. Yet this is an opportune time for investors to reshuffle their portfolios. The Indian growth story remains intact and there is no concern from the long-term perspective.”
The sub-prime factor has not yet played itself out fully as markets could be affected adversely with more negative news. At the same time, the Left parties challenged the India-US civil nuclear agreement. The furore simmered, sparking fears of snap elections.
The market took a beating. Now signs of recovery are visible but there are mixed opinions on how the recent global slump may or may not affect India. Yet India’s big picture is the growth trajectory as the domestic accumulation of capital at 32 percent could keep the economy going.
And the global economy, including that of the US, is firm. It can be argued that the correction in the Indian market had a positive side as it withstood the tremor. The long-term investors stay invested. Since no one knows when it will happen again, the short-term NRI investor will be ready.
(A media consultant to a UN Agency, Kul Bhushan previously worked abroad as a newspaper editor and has travelled to over 55 countries. He lives in New Delhi and can be contacted at: [email protected])