Indian capital market is in trap of FII

Indian capital market is now in the trap of Foreign Institutional Investors (FIIs) because whenever FIIs sale, the stocks market dips and whenever they purchase, the stocks market rises. In this year, Indian capital market rose to 21206 and the fell to near 12000 points. It means 9000 points up and down in a six months. Now BSE index is moving 300 to 500 points up and down normally, this is 3 to 5 % up and down which is not normal in this time. Many stocks are trading below 40 % on their peak level and most of the IPOs are trading below their issue price. Most of the investors are loosing their valuable funds in this time.

Confidence of most of the investors is depressed and they are withdrawing their hands from the market. This is not a healthy symbol for Indian capital market. When Indian capital market were on the peak level, 22% of total value of Indian shares were in the hand of FIIs. At the time of boom, flow of investment was rapidly increasing. Now we can see that FIIs are withdrawing their funds from the market and Indian markets has entered the phase of depression. From January 2008 to July 2008 FIIs purchased Rs. 4568756 Cr worth of shares and they sold 520562 Cr worth of shares. It means they withdrew Rs. 61806 Cr from Indian capital market and now Indian capital markets are under pressure due to selling from FIIs. When FIIs purchase, market moves upward and when they sell, market moves downward. This is clearly shows that Indian markets are in the trap of FIIs. This is not a healthy symbol.

Their is a need of effective control on the investment of FII. Govt must encourage FIIs for long term investments rather than short term investments. Three year locking period must be imposed on FII's investment. Otherwise we can not save the confidence of Indian investors and we cannot protect their funds from sharp ups and downs.