Significant churn in FII stakes in December quarter

Foreign Institutional Investors have significantly churned their equity stakes in Indian companies in the period between September 30, 2007, and December 31, 2007, hiking their stakes in about 200 of the CNX 500 companies, while cutting stakes in an equal number.

An analysis of shareholding pattern for the CNX 500 constituents for this period suggests that FIIs have taken a stock-specific rather than a sectoral view in rejigging their positions.
Significant divergence

FIIs chose to peg up their stakes in Sintex Industries, United Phosphorus, Monnet Ispat, Punj Lloyd and Nicholas Piramal.

On the other hand, BEML, Sakthi Sugars, Indiabulls Financial and Lumax were some of the stocks where they significantly trimmed their stakes.

There was significant divergence in FII preferences within each sector. For instance, while sugar stocks such as Shree Renuka Sugars and Balrampur Chini Mills saw significant increases in FII holdings, Sakthi Sugars saw reduced FII holdings.

Within the technology sector, FIIs appear to have used weakening stock prices to step up exposure to tier-I players such as TCS and Satyam Computer as well as niche players such as Educomp and Infotech Enterprises.

But they have sharply trimmed stakes in mid-tier players such as Hexaware, Mastek and Aztecsoft in this period.

In financials, IDFC and Indiabulls Financial saw declines in FII stakes, while City Union Bank and Kotak Mahindra Bank saw FIIs add to their holdings in this period.
Significant selling

While this data captures FII action for the September-December 2007 period, FIIs have indulged in significant selling on the Indian bourses since January this year and this could have resulted in a significant change in the above positions, after the date of disclosure.

Among the stocks that were accumulated by FIIs in the preceding quarter, some such as Nicholas Piramal and United Phosphorus have contained the declines in price well during the recent corrective phase.

However, FII picks such as Sintex Industries, Punj Lloyd and Nagarjuna Construction have registered much sharper declines than the Sensex.

Sebi allows mini-contracts on Sensex, Nifty

Securities and Exchange Board of India (Sebi) today introduced mini-contracts in the derivatives markets based on the Sensex and the Nifty indices to improve liquidity and increase investor participation for the index-based products.

Mini-contracts are a fraction of normal derivatives contracts, and will help individual investors hedge risks of a smaller portfolio.

Initially, the mini-contracts would be limited to index futures and options on the 30-share BSE index and the 50-share NSE index.

The Bombay Stock Exchange (BSE), in a separate release, said it would launch the mini-contracts on the Sensex from January 1. The mini Sensex contracts will have a market lot of five units.

The small size of the contract would be attractive for retail investors as there would be comparatively lower capital outlay, lower trading costs, more precise hedging and flexible trading, the BSE release said.

The security symbol for the Sensex mini-contracts would be MSX and it would be available for one, two and three months along with weekly options, BSE said.

NSE officials were not available for comments, but it is expected that the exchange would also announce the launch soon.

The recommendation to introduce mini-contracts was made by Professor M. Rammohan Rao, who headed the Derivatives Market Review Committee (DMRC) of Sebi.

The move to introduce mini-contracts follows its increasing popularity globally due to the higher liquidity and the ability to get in and out of a trade quickly with low impact cost.

Peninsula Land to raise Rs 525cr

Peninsula Land has approved the issue of 43,750,000 equity shares of Rs 2 each at Rs 120 per share aggregating to an issue size of Rs 525 crore.

According to a release issued by Peninsula Land to the BSE today, the issue price is above the floor price calculated in accordance with Clause 13A.3 of SEBI (DIP) Guidelines.

The bid closing date, pursuant to the proposed issue of equity shares under Chapter XIII-A of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000, is December 20, 2007, the release added.

UBS Securities India and Enam Securities acted as joint global book runners for the issue.

IFCI stock plunge hits investors

The shares of Industrial Finance Corporation of India (IFCI) plunged by 23.41 per cent on Thursday after the stake sale of 26 per cent to strategic investors collapsed.

Thursday’s decline was the biggest in a single day in the past 13 years, bleeding small investors and margin traders the most.

Several small investors had bought the IFCI shares at higher levels of Rs 100-plus, hoping that the stock would further run up to new highs following a turnaround in the company’s fortunes after the entry of strategic investors.

The stock closed at Rs 76.70 on Thursday against its previous close of Rs 100.15, forcing several brokerage houses to ask clients to pay the mark-to-market losses or wind up their positions at the counter in the derivatives segment.

The general expectation in the market was that strategic investors might be bidding close to Rs 140 or Rs 135, which tempted investors to buy the stock at Rs 100-plus levels.

On Tuesday’s stock price of Rs 100, the trader would have had to pay a 25 per cent margin on one market lot of 7,875 shares, which works out to around Rs 2.5 lakh.

Therefore, when the stock fell to Rs 77.05, nearly 80 per cent or over Rs 2 lakh of traders’ margin money got wiped out, said dealers.

According to the data available on the National Stock Exchange (NSE) website, the standing market-wide position is over six crore shares currently.

“If the stock does not bounce back to Rs 90 or Rs 95 in the next three trading sessions before the F&O expiry, it is then likely that the stock may see a further downside,” said a dealer.

In the cash segment, over 210 million shares were transacted on both BSE and NSE.

Kingfisher to merge with Air Deccan

The boards of Deccan Aviation and Kingfisher Airlines on Wednesday unanimously decided to merge Kingfisher Airlines with Deccan Aviation.

The merger will create the largest player in the domestic aviation market and pave the way for Vijay Mallya to fly his Kingfisher Airlines to overseas destinations.

Deccan Aviation will subsequently be renamed Kingfisher Airlines. Vijay Mallya will be the chairman and CEO of this company and GR Gopinath, who pioneered low cost aviation in India with Deccan Aviation, will be its vice-chairman.

Mallya’s UB Holdings, which owns the closely-held Kingfisher Airlines and has 46 per cent in Deccan Aviation, will hold a “significant majority” in the new firm.

Today’s decision follows recommendations to this effect made by professional services firm Accenture which was appointed to present a report on synergies between the two airlines.

Both the airlines are in the red. While Deccan Aviation reported a loss of Rs 419 crore for the year ended June 30, 2007, Kingfisher Airlines had a loss of Rs 577 crore on its books for the year ended March 31, 2007.

The new firm will operate two separate brands – Deccan and Kingfisher – and will retain their identities of being a low-cost carrier and a full-service airline, respectively.

Addressing the media after the board meetings, Mallya said that the new firm will kick off by early next fiscal. The swap ratio will be decided within four to five weeks’ time from today and will be decided by accounting firms KPMG and Dalal & Shah.

This process of merger has been a result of Kingfisher Airlines recently acquiring 46 per cent in Deccan Aviation through a two step process.

First, Kingfisher Airlines acquired 26 per cent in Deccan Aviation and then made a public open offer for shareholders of Deccan Aviation. UB Holdings collectively spent around Rs 1,000 crore for this acquisition.

Mallya, who has been lobbying hard with the government to let him fly abroad before his airline completes five years of domestic operations, would get what he wanted through this strategic move.

“There is absolutely no doubt on why Kingfisher Airlines cannot fly overseas. From August 2008, the merged firm will have a right to fly overseas. With our two brands, we will surely fly overseas post that date,” he held forth.

It is understood that Deccan will fly to SAARC and West Asian countries, while, Kingfisher's target will be to touch down at San Francisco and New York from Bangalore.

Gopinath further added that Accenture in addition to this merger has also advised elaborately on the route rationalization, cost utilization and staffing issues, which will be detailed at a later date.

Source - Business Standard

Vale in talks with Tata Steel for plant in Brazil

Tie-up with world's biggest miner will boost Tatas' ore security

Vale, the world’s largest producer of iron ore and pellets, is in talks with Tata Steel to set up a steel slab plant in Brazil.

The $20 billion mining company, formerly known as CVRD, has three plants under construction in Brazil in partnership with ThyssenKrupp, Dongkuk and Baosteel. Vale has a minority stake in these projects.

According to sources, Vale is in talks with Tata Steel as well as some of its clients for the new steel slab plant.

Replying to a query over a possible partnership with Tata Steel, a spokesperson for the Brazilian company said, “A company as large as Vale is often in talks with several companies, among them Tata Steel from India. But other than that, there is no further information about partnership or anything beyond.”

A Tata Steel spokesperson said, “At this point, there is nothing.”

Tata Steel has a plan to set up a 4.5 million tonnes steel complex in Vietnam in partnership with Vietnam Steel Corporation, the largest steelmaker in the south-east Asian country.

According to industry analysts, a Tata Steel-Vale alliance will be a win-win scenario for both companies.

While Vale is looking to leverage its mineral resources and cash in on the booming steel market, Tata Steel is aiming to set up steel plants close to its raw material base as well as ramp up its raw material security.

Vale’s southern system mines have about 4.5 billion tonnes of iron ore reserves and the production capacity is about 170 million tonnes a year.

In the northern system, the Carajas has a production capacity of 100 million tonnes. The mineral country of Carajas has high iron ore reserves estimated at about 16 billion tonnes.

Tata aSteel, the world’s sixth largest steelmaker, recently signed a joint venture agreement with Sodemi (a state-owned company for mineral development) to develop the Mount Nimba iron ore deposits in Ivory Coast, West Africa.

Tata Steel’s initiatives to step up raw material security is largely on account of Corus, which requires 28-30 million tonnes of iron ore.

Tata Steel has set a target of 50-60 per cent security over the next five years, against the current 20 per cent.

Prior to the Mount Nimba deal, Tata Steel signed a joint venture agreement with Riversdale Mining for a coal project in Mozambique.

Marico targets kids with new sub-brand under Parachute

Marico is extending its largest selling hair oil Parachute to the kids segment. After creating Sparsh for babies last year, it has now extended Parachute as a shampoo, cream gel and a non-sticky oil under a new sub brand — STAR*Z — to cater to kids between 5 and 12 years of age.

Mr Saugata Gupta, CEO, Marico Consumer Products, said: “The new sub brand — STAR*Z — under Parachute Advansed is not exactly meant for babies.”

Targeting a different age group with its new offering, Marico is currently test marketing the products under a prototyping approach in certain markets before launching it at a national level. Bringing in the ‘goodness of coconut’ in its new range, Parachute Advansed Star*Z non-sticky hair oil is priced at Rs 29 for 100 ml while the shampoo is priced at Rs 54 for 100 ml.

In fact, all the products under the Parachute Star* Z franchise are fortified with ‘protein vitamin shakti’, according to the company. Even Sparsh products come with the promise of the ‘long lasting goodness’ of Parachute. However, Marico has decided to segment its offerings under Sparsh and Parachute advansed Star*Z to cater to different categories of consumers.

“Sparsh is catering to babies and has products such as massage oils and soaps under it unlike the new Parachute Advansed Star* Z brand which is meant for kids who are above five,” says an official from Marico. “This is not a full-scale launch of Parachute Advansed Star*Z and we are test marketing the products,” emphasises the official.

Industry observers feel that most baby care brands have been struggling in the market with J&J’s dominance and this includes Marico’s Sparsh brand as well.

As Mr Bipin Vengsarkar, Executive Director, JL Morison, says: “Most of the new entrants, including our own brand of Baby Dreams, have been finding it difficult in this market and it is J&J which continues to dominate this market. Today, Marico’s baby care brand, Sparsh, has not been able to make a mark in this segment and even Wipro is concentrating on its diaper brand more than its baby care range.”

Source - Hindu BusinessLine

Finolex: Powering growth

The company's scrip rose 2.6% after it signed a JV with Japan-based J-Power Systems

At a time when the country will receive an additional power capacity of 62,213 MW over the next five years, Finolex Cables will be able to leverage the strong growth conditions in the power sector through a joint venture with Japan-based J-Power Systems to offer turnkey solutions in extra high voltage cable systems.

The latest development helped the stock rise 2.6 per cent to Rs 109.35 on Thursday despite the overall weakness in the market.

Meanwhile, in the September 2007 quarter, Finolex’s operating profit fell marginally on a y-o-y basis to Rs 39 crore, while its net sales rose 21 per cent to Rs 334 crore. Its operating profit margin also declined 260 basis points y-o-y to 11.7 per cent in Q2 FY08.

The pressure on its margins in the last quarter was due to its adjusted raw material costs as a percentage of net sales rising 360 basis points y-o-y to 79 per cent in the last quarter.

Analysts, however, highlight a high base effect in the first half of FY07. That’s because cable companies were able to report strong growth in the operating profit margins due to a sharp rally in copper prices on the London Metal Exchange.

In Q2 FY08, its copper rods division clocked a revenue growth of 30.4 per cent y-o-y and electrical cables business went up 8.4 per cent due to curtailed demand during the monsoon season.

It is understood that Finolex’s power cables plant in Uttarakhand, which was scheduled for commissioning by November 2008, will now go onstream by April 2009. The stock trades at a reasonable 19 times estimated FY08 earnings and 14 times FY09 earnings.

Source - Business Standard

285 US dealers sign up to sell Scorpio

To invest $178 million in setting up sales and service outlets.

In a little over a year, Mahindra & Mahindra’s (M&M’s) all-Indian utility vehicle, Scorpio, will enter the quality-conscious US market, which is also the largest in the world with 15 million vehicles in annual sales.

The company already has firm orders for 45,000 units of Scorpio for the first year, which is more than the 40,000 it sold in India in the last financial year.

More importantly, 285 US dealers have signed up to sell the vehicle and are investing $178 million in setting up sales and service outlets.

Mahindra & Mahindra had spent $120 million on developing the Scorpio platform five years ago, and there are 140 Scorpio dealers.

The enthusiastic response to the vehicle in the US comes amid a clamour of protest by US dealers against selling Jaguar to an Indian company for the fear that it would erode the image and sustainability of the brand.

“The timing of M&M’s entry into the US is perfect. With the price of the fuel going up, Americans want to buy SUVs and trucks that are not too costly to operate,” John Perez, the chief executive of Alpharetta, Georgia-based Global Vehicles, which will be handling Scorpio sales in the US, told Business Standard over the phone.

Starting March 2009, three diesel variants of Scorpio will be sold in the US. “We already have 45,000 bookings for the first year. All of them are backed by letters of credit,” said Perez, adding that Scorpio would not be priced cheap. He hinted at a tag of $25,000.

Pawan Goenka, the president of the automotive division of M&M, said he was not surprised by the demand for Scorpio in the US, though he conceded that it had exceeded the company’s target.

The current annual capacity of 52,000 units of Scorpio in India will have to be expanded to meet the US demand.

“It could either be in Nasik or Chakan (near Pune). We have not decided that,” he said, adding that the company would spend $50 million on upgrading the vehicle to meet the US National Highway Traffic Safety Administration requirement.

Source - Business Standard

Tata Steel: Win-win deal

The steel major's joint venture in Ivory Coast is set to cut costs at the Corus facility

Tata Steel’s announcement of a 75 per cent stake in a joint venture to develop iron ore facilities with a state-owned company in Ivory Coast is clearly aimed at bringing down the cost of production at its Corus facility.

Corus supplies steel to the higher end of the Western European steel market, but it does not have iron ore captive resources in contrast to its parent in India.

Analysts point out that supplies of iron ore from the JV in Ivory Coast could directly help in bringing down Corus’ cost of production by $50-60 a tonne over the medium term. The Tata Steel stock rose 3.4 per cent to Rs 865 on Wednesday.

Tata Steel’s cost of production in the domestic market is estimated at $280-300 a tonne (excluding freight cost to the end-customer), while that of Corus is estimated at more than $450 a tonne.

The production cost is higher at Corus for two reasons: its products are value-added and reasonably complex, and it does not have access to captive resources.

The JV in Ivory Coast would give Tata Steel access to reserves of over 700 million tonnes of ore and it is expected to invest $1.5 billion (approximately Rs 6,000 crore) over the medium term to develop these facilities.

Supplies from this facility will be critical to Corus at a time when global contract iron ore prices are expected to jump, when long-term contracts come up for renewal next year.

In addition, Corus is expanding its output of saleable steel by nearly 300,000 tonnes in FY08 and a further 350,000 tonnes in FY09, which would require crucial raw material supplies.

Prior to this expansion, Corus’ finished steel capacity was 22.1 million tonnes.

To part-finance its Corus acquisition, Tata Steel is planning to dilute its equity by nearly 43 per cent via its rights issue to raise up to Rs 6,000 crore.

Prior to this development in Ivory Coast, Tata Steel has also been focusing on improving its captive raw material supplies via a JV to develop a hard coking and thermal coal project with Riversdale in Mozambique. At Rs 865, Tata Steel trades at a reasonable 12-13 times estimated FY08 and 9.5 times FY09 earnings.

Source - Business Standard

Indo Rama Synthetics to enhance capacity

Expected to invest around Rs 1,000 crore over four years

After achieving a production capacity of 6,00,000 tonnes of polyester staple fibre, filament yarns, textured yarns and textile grade chips at its Butibori plant in Nagpur, Indo Rama Synthetics (IRSL) is eyeing an increase in its manufacturing capacity.

The company is planning to set up a new purified terephthalic acid (PTA) plant near Mangalore and is planning to bid for bigger power projects.

In an exclusive interaction with Business Standard, IRSL chairman and managing director O P Lohia said, “As ONGC, IOC and MRPL are planning to set up a paraxylene plant in Mangalore, PTA, which is a raw material for manufacturing polyester and a by-product of paraxylene, will be available in plenty. So, it would be wise to set up a manufacturing facility there.”

With Oil and Natural Gas Corporation, Indian Oil Corporation and Mangalore Refinery and Petrochemicals setting up paraxylene plants in Mangalore, the city will become a petro-chemical hub in five years.

Lohia pointed out that it will be unviable to open a small-sized PTA plant. IRSL will thus establish a plant with an annual polyester manufacturing capacity of 2,00,000-3,00,000 tonnes.

The company is expected to invest around Rs 1,000 crore for setting up the PTA plant over a period of four years, company sources said. The valuation of IRSL is over Rs 2,000 crore, according to current estimates.

Lohia refrained from disclosing the name of the partner for setting up the PTA plant near Mangalore. “We are waiting for the state government to assume office in Karnataka so that we get the clearance”, Lohia said.

The company is also planning to venture into the power sector in a move towards diversification. IRSL has set up a coal-based power station with a capacity of 100 mw at an investment of around Rs 140 crore near Nagpur.

Some portion of the power is sold to Maharashtra State Electricity Board to meet the power supply requirements in the region.

Lohia said, “As we are experienced in developing and running a power plant, we are planning to enter the power generation sector.”

The company is also looking for a coal mine around Nagpur, so as to maintain the coal supply to its power plant.

The company has also submitted bids for setting up a power plant in the Vidarbha region. It, however, declined to provide details regarding the bid.

Source - Business Standard

Eicher Motors: Unequal deal

Volvo has bought 45.6% stake in Eicher's subsidiary, rather than taking the direct route

Eicher Motors has given its commercial vehicle (CV) business a fresh lease of life by partnering with truck maker Volvo.

Volvo has bought the 45.6 per cent stake in a subsidiary into which Eicher will transfer the CV and related component business. But valuations could suffer as a result of the holding company discount.

The shareholders of Eicher Motors will not get the proper value of the CV business even though the accounts of the subsidiary will be consolidated with those of the parent company.

Ideally, Volvo should have purchased direct stake in the parent company. The resultant open offer would have given the shareholders an option to sell.

Not surprisingly, the stock of Eicher Motors has declined 14 per cent to Rs 468 since the announcement of the JV.

The deal values Eicher’s 54 per cent stake in the JV at $418 million or Rs 595 a share.

Eicher will continue to own the motorcycle business which contributes about 10 per cent to sales and just about breaks even.

It has remained a small player in the CV space, with a share of about three per cent. It will benefit from the infusion of cash, amounting to $275 million and technology from Volvo.

However, it will be some time before Eicher-Volvo gains market share as the CV market itself is going through difficult times.

While the deal is a great one for the promoters, it will be a long time before shareholders make money.

Source - Business Standard

United Phosphorus may bid for Nufarm

Talks follow rejection of ChemChina's $3 billion bid

United Phosphorus (UPL), the country's largest crop protection company, is set to bid for Australia’s largest agriculture chemical company, Nufarm.

Sources close to the development said the Mumbai-based Shroff-family, promoters of UPL, has started discussions with the Australian firm's management.

The development follows Nufarm ending talks for a $3 billion bid with a consortium led by China National Chemical Corp (ChemChina), which includes private equity firm Blackstone.

UPL, which ranks among the top five crop protection companies in the world, has been keen on taking over a foreign giant after its abortive attempt to acquire Japan’s Arysta LifeScience Corporation.

A banker in the know of the development said the discussions are at the initial stages.

Global crop protection giants like Syngenta, Makhteshim Agan, and Monsanto might also spring surprise bids for Nufarm, the banker said. He also did not rule out the possibility of a revival of talks between Chemchina and Nufarm.

The Nufarm stock today rose by more than two per cent after ChemChina said it “was still considering possible acquisition of Nufarm.”

This announcement is contrary to Nufarm’s statement on Monday, according to which the ChemChina consortium had said it was unable to formalise its proposal by a deadline, which ended on Sunday.

Sources are of the opinion that UPL will rope in a private equity fund if it puts in a financial bid for Nufarm.

Apart from Blackstone, the ChemChina consortium includes private equity firm Fox Paine Management.

The consortium proposed to offer $17.25 cash per share and a pre-acquisition dividend of 30 cents per share.

Nufarm had said last week it had received approaches from parties interested in the company since the Chinese-led consortium proposed a takeover.

Source - Business Standard

Maruti to make Suzuki's global car

The A-Star hatchback will be assembled at Manesar plant from October next year

Suzuki Motor Corp on Tuesday said that Maruti Suzuki India will make its next global car, A-Star, which will drive its growth in Europe and help increase its annual sales in the continent to 420,000 vehicles from 310,000 in the last fiscal.

Maruti, in which Suzuki owns 54.2 per cent equity, will make the hatchback at its Manesar plant, near Delhi, from October next year.

The 1,000 cc car will be one of the company’s two big launches next year. The other will be Splash, which will come in 1,200 cc petrol and diesel versions.

However, while two-thirds of A-Star’s initial production of 150,000 a year will be exported, Splash will be primarily for the Indian market.

This is the first effort by a Japanese auto maker – all of whom take immense pride in their manufacturing prowess and quality consciousness – to make a global car in India.

A-Star will be produced only in India. It will not be sold in Japan, where the company already has a mini car for the market.

In recent years, Maruti has contributed handsomely to Suzuki’s profits. In the first half of this financial year, it sold more cars in India than what its parent company sold in Japan.

It is understood that Maruti, which had sent a team of engineers to Japan for inputs in the development of Swift, has contributed a lot even to A-Star from the conception stage.

“Suzuki Motor Corp attaches great importance to India,” Suzuki Chairman Osamu Suzuki said at a news conference in New Delhi, as he held up a picture of the new car, with headlights that looked like eyes with eyelids.

Suzuki will invest $1.79 billion in its plants in India as it steps up annual capacity to 960,000 cars by March 2009.

The Maruti stock ended up 3.2 per cent at Rs 1,078.50 on Bombay Stock Exchange, whose Sensitive Index closed at a new high on Tuesday.

Source - Business Standard

What to do this Diwali?

From past market performance it is evident that Market tends to rise around Diwali time. Investors have a unshakable faith in this tradition as it also marks a new year according to Samvat calendar.

No doubt this diwali also we can see the market moving up as it usually happens, but, what after diwali. Offlate it seems Indian markets are not taking into consideration the global happenings. The US markets have been in standstill for almost a quarter now. The financial sector in US is worst hit by the ongoing subprime crisis and large financial houses like Merrill Lynch, Citibank etc have written off billions of dollar eroding shareholders wealth.

Even though the direct effects of subprime, on the Indian markets, are pretty limited. Any slowdown in US can dampen the earnings visibility of Indian companies. Around 80% of India's total exports are targeted to US continents.

Not only the subprime crisis, adding to it the US housing data is also slipping into negative territory. August reported New housing Construction dropping 20% on a yearly basis. The US housing prices is continuing to fall with a drop of 4.4% in august alone. The housing market in US have not found bottom yet and is expected to fall further as the housing inventory is currently massively over supplied.

How US housing effects India?. The major concern is that falling house prices will hurt consumer spending, which accounts for two-thirds of the US economy. This in turn will trigger the US consumers to lodge money in the bank, rather than going for a shopping spree. As we know India is a large supplier of home products ranging from textiles, wood to cookware to US, the exports of this will come to a stall and in turn put a question on the earnings visibility of these companies. Already these sectors are paring losses into their profits due to rupee appreciation. Textile being India's largest employment house can make many lose jobs.

Coming back to subprime, the trouble starts when large-sized funds (with exposure to highly leveraged sub prime markets) start liquidating their holdings in emerging markets to make good their losses in a sinking sub prime market. In the case of Chinese market, FIIs are not allowed to pull out money at their whims and fancies; there is a lock-in period for staying invested in that market. So evidently since India is receiving a huge inflow of FII's money into the stock market the risk of fear led fall in Indian markets is high.

What should Indian investors do after diwali?

1) Investors must use the diwali pre-market rally to book partial profits and sit on cash.
2) Invest only in fundamentally strong stocks which targets domestic consumption and are less dependent on US Economy. Stock in Power, Infrastructure would be a good bet to invest.
3) Monitor global cues at a regular basis before taking a long position in stock market.

Always remember "Cash is King". Cash in hand is worth a fortune rather it getting struck in a bear market.

Happy Deepavali.. Happy Investing