FIIs pull $2 bn in four days; set to come back

Two months ago, Indian regulators were finding it tough to manage the huge capital inflows. The scenario has changed, at least, for the time being. Foreign institutional investors (FIIs) who led the bull rally in 2007 with a $17-billion investment have withdrawn $2 billion (Rs 8,000 crore) from Indian stocks in the last four days. While they pulled out $565 million last Wednesday, $541 million on Thursday, $336 million on Friday, FIIs sold stocks worth $601 million on Monday. But experts say this’s only a temporary phenomenon as the US Fed has cut rates by 75 basis points, a move that will encourage US investors and funds to look for gains in emerging markets like India. “FIIs won’t desert India. They will come back with more allocation as India and China still stand out as good growth stories,” said Prakash Subramanian, MD (markets), Standard Chartered bank.

Global equity markets have been very volatile on the back of weak economic data out of US and earnings news from financial majors. “These developments have increased investor concerns about the slowing economic growth in developed countries and the impact of subprime related losses. In India, equity supply is going to increase due to a slew of IPOs. Over the near term, any concerted effort by governments and central banks in developed economies (read stimulus packages and rate cuts), could boost the sentiment,” said Sukumar Rajah, CIO, Equity, Franklin Templeton Investments.

FII Outflows

January 16: $565 mn

January 17: $541 mn

January 18: $331 mn

January 21: $601 mn