Foreign institutional investors seem to have lost their appetite for Indian stocks this month.

In the last three days, they have been net sellers in the cash market, to the extent of Rs 120 crore (Rs 1.2 billion).

This is the first time during the current bull run that foreign institutional investors have been net sellers for three days in a row.

The distinct slowdown in foreign institutional investors' interest in India stocks is also reflected in their declining share in the turnover in the National Stock Exchange.

Foreign institutional investors, which accounted for around a fourth of the turnover at the NSE's cash market on November 1, 2003, put in trades amounting to only a sixth of the turnover on November 11. By November 18, their share had fallen to 13.6 per cent.

Their gross turnover in the cash market was over Rs 1,500 crore (Rs 15 billion) each on November 3 and 4, but fell to around Rs 1,100 crore (Rs 11 billion) on the following two days. The turnover declined thereafter, and hit a low of Rs 530 crore (Rs 5.3 billion) on November 17.

As a result of the slowdown in foreign institutional investor activity, the NSE's daily turnover declined from an average of over Rs 6,000 crore (Rs 60 billion) in the first week of November to around Rs 4,500-4,900 crore (Rs 45-49 billion) thereafter.

However, foreign institutional investors stepped up selling in the derivatives -- futures and options -- segment.

In November, their net sales aggregated Rs 857 crore (Rs 8.57 billion) as they bought contracts worth Rs 1,549 crore (Rs 15.49 billion) and sold contracts worth Rs 2,406 crore (Rs 24.06 billion).

The trend has not been lost on the markets. Mukul Pal, derivatives analyst at Edelweiss Capital, says: "This is in line with the overall market trend, where most heavyweight counters have seen a fall in traded volumes. Moreover, I think foreign institutional investor activity in the derivatives market is limited to arbitrage and hedging."

Foreign institutional investor activity in the derivatives segment slowed in November, with daily turnover falling to below Rs 50 crore (Rs 500 million) in the last five trading days from Rs 1,000 crore (Rs 10 billion) when they were first allowed to trade in derivatives in September 2003.