Redemtion pressure on Funds

Wednesday, October 15, 2008

For a change in this relentless selling FII's turned buyers in the market with net purchase Rs. 898.4 crores. Year-to-date they have been net sellers of over Rs 89,000 cr or nearly $18 billion.

FII & DII Turnover (BSE + NSE)
Trade DateBuySalesNet
Oct, 0823,062.1430,580.66-7,518.52
Since 1/1/08 *605,048.17694,291.53-89,243.36

While this development is short term positive, redemption presssures are continuing on hedge funds and FII flows are likely to turn negative again. Domestic institutions have taken up nearly 75% of the FII sales as savers have continued their weekly/monthly contributions to their mutual fund.

Now, there are clear indications that redemption pressures on domestic mutual funds are intensifying. Combined with continued pressure from FII's, a capitulation is becoming more and more likely in the Indian market.

We are also getting closer to the bottom with reports like the following multiplying:

Jet Air dismisses 600 employees

Sensex could dip below 10K levels: Shankar Sharma

Property prices to decline 20%: Orbit Corp

Expect these reports to multiply..lay-offs, realty company problems and predictions of lower market levels.

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