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The story in a nutshell is that so far this year FIIs have pumped in little money, and all of it has gone into debt. They have not put money into equities, on which no return is assured; nor have they taken any money out. This can be a crucial factor, either way, since 30 per cent of non-promoter equity is in the hands of FIIs. That leaves one question. Why did the Sensex rise five times as much in (January-October) 2009, as in 2010, when FII flows into equity were nearly twice as large?
The answer seems to be that in 2009 there was a strong sense of reverting to norm. Ever since, the market seems to have been sort of feeling its way to a new normal.
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