The FII's - When they invested in junk stocks!?

Edited by basant - 26/Jul/2007 at 8:04pm

Foreign portfolio managers, it seems, have not just confined themselves to large and mid-cap stocks between April and June, but have been buying into smaller companies as well. There are around 40 such firms in which foreign fund houses have taken a stake, ranging from 1% to 35%.

Interestingly, they have even bought into companies, which have market capitalisation as low as Rs 8 crore. A majority of the companies where they have invested for the first time in thequarter are those which have a market cap of below Rs 200 crore.

However, they said a company does not become fundamentally sound just by virtue of foreign funds buying into them. They added these investments can influence the stock prices, but in most cases these are portfolio and not strategic investments. Hence, the foreign funds will not be able to influence the business decisions of the companies.

 

Source: ET

 

 

Today in ET on one of the usually nonsensical articles about market levels and such there was one particular line which was note worthy: (roughly)

Originally posted by PrashantS There are so many instances.Even today most of the FIIs want to buy what the ohter FII has bought ."Jeyen ge saath saath or marange bhi saath saath".There ar e Number of stocks which are cheating the markets .I think it will take soemtime before our markets mature.But till then fraud and specualtion is here to stay.

I think there is a lot of corruption going on in allocation of money into stocks by fiis and indian funds also. The recent QIPs in various stocks and the appetite of fiis and domestic funds for the below average recent ipos makes one wonder whether any kind of logic is applied before invested other people's money into these ipos and qips.

It becomes very easy for companies to bribe a few fund managers(even fii fund managers, being white skinned does not make them immune to corruption) especially those who are influential and on whose basis others of the herd follow.

If it were not so, I don't think anybody in his right mind would have invested in indiabulls ipo or some other such costly ipos and even recent qips done by many realty and infra companies at opportune levels of markets.