Date:24/02/2007 URL: http://www.thehindubusinessline.com/2007/02/24/stories/2007022403711500.htm

Back Sensex's return in 2007 slips into negative

Lokeshwarri S.K.

FII inflows slow down this year

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Chennai Feb. 23 The return provided by the BSE Sensex for 2007 turned into negative territory following the 389-point tumble on Friday; the year-to-date return generated by the Sensex is negative 0.97 per cent.

The year has started on a rather tentative note with a marked slowdown being observed in the FII inflows into the country. The inflows received from FIIs in January and February 2007 is 48 per cent less than what was received during the same period in 2006.

While this is generally being viewed as a welcome correction to cool down the stock prices that were trading at unrealistic valuations, the apathy of the external investors in the first two months of the calendar year is a cause of concern.

Fund Flows

After three years of bull-run, there is a marked change in the pattern of the global fund flows in this calendar year. As the markets that performed well in 2006 have slowed down, global investors are drawn towards more riskier frontier markets in order to maintain the rate of return that they have been getting over the last three years.

A close examination of the global markets this year reveal surprise. The Vietnamese stock market with a 45 per cent return heads the list. It is followed by Ukraine stock market with a 36 per cent return. Other strong performers this year include Nigerian stock market, Croatian stock market and Pakistani stock exchange.

Among the BRIC stock markets, China is the only one that continues to hold the fancy of the external investors. The Shenzhen Index ranks third in the gainers list with a 32 per cent gain. While Brazil just managed to climb into the gain after a rather unsteady start and has 4 per cent gain for the year, Russia is threatening to go into the negative territory.