Non resident Indian investors appear to be smarter than their counterparts back home, if a recent trend in trading in stocks is anything to go by.

The Bombay Stock Exchange recently analysed the trading activities of NRIs which threw up some interesting revelations. It was observed that NRIs take to heavy buying when the rates go sliding, and resort to selling when the stocks scale up. The trend was clearly apparent as the Sensex see-sawed over the last two months.

In August, NRIs recorded almost double purchases over July in response to the weakening Sensex in the first two weeks of August. Almost 1000 points were lost between July 27 and August 17 as the Sensex reacted to the volatility in the global markets. In July, NRIs had picked up stocks worth Rs. 3.29 crore when the Sensex was at its best in the first three weeks. The Sensex slipped sharply in the last week of the month, giving in to pressures from US sub-prime lending.

NRIs watch out for market corrections after they peak and invest in equities when stocks dip southward. Over the last 6 months, NRI trading has been riding the Sensex wave – in January, 2007 when the Sensex appreciated by 300 points, NRIs pitched in with Rs.2.16 crore worth of sales. In February, when the Sensex dived over 1000 points, NRI investments in equity touched Rs.68 crore.

The following month, the purchases surged to Rs.76 crore, but as the Sensex started its upward climb in April by 800 points, NRIs indulged in selling, netting Rs. 68 crore. Net sales or purchases by NRIs in equity are around Rs.10 crore a month.

The selling was sustained till June when the Sensex was rising. NRIs purchased shares worth Rs.79.37 crore this year, while the Sensex has made a net advance of 300 points. In 2006, it was observed that NRIs sold stocks during 6 months of the year, and bought up shares during the rest of the year.

NRIs can make portfolio investments through the Indian stock exchanges with repatriation and non-repatriation benefits. Stocks are an attractive option for non-resident Indians, especially since the liberalisation process began. NRIs acquired shares worth USD 930 million in 2004-05, worth USD 2.2 billion in 2005-06, and then notched USD 6.3 billion in 2006-07.

Overseas Indians have shown their preference for putting their money in bank stocks, which accounted for USD 3 billion in December 2006.

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