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Breaking the FII myth

December 5, 2008

An absolute gem of an analysis is done by economist Ila Patnaik in Financial Express some time back, [the online link to which is given below]

The crux of the matter is:

1. As always, when newspapers and news show anchors keep on repeating, “FIIs are selling, run!” its almost always wrong.

2. FIIs can’t be really clubbed into one big homogenous investors.They are more of a group, which trades among itself and trades with the market. Hence when FII-A sells, FII-B might be buying, and vice versa

3. Most importantly, the last paragraph speaks volumes of what I earlier predicted and talked about in this post dated 24th November [very surprising, its the same day, Ila also publishes her post] and also vaguely in my latest Seeking Alpha article.

Ila Patnaik has done a beautiful job in dissecting the entire investment scenario and why FIIs are given such a huge limelight, albeit it just accounts for 1-9% of liquidity.

Do give it a read. Its a good piece of work.


The link to Ila Patnaik’s article: Foreign Institutional Investors

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