FIIs pulls out $ 155 mn from markets

MUMBAI, May 27: Foreign institutional investors (FIIs) have pulled out nearly $ 155 million (Rs 612.8 crore) from the Indian stock and debt markets in May alone. The FII sellout came after the sanctions imposed by the US and freezing of loans by World Bank and other agencies. According to the Securities and Exchange Board of India, gross purchases by FIIs during the period May 1-22 were Rs 521 crore, whereas gross sales amounted to Rs 1,133.9 crore. FIIs were pulling out funds in April also. Net investments by FIIs in April too were negative, but lower at Rs 108.4 crore ($ 27.4 million).

In fact, FIIs were pulling out funds in October-December period. This happened after the fall of the Gujral government and political uncertainty before the elections. When the Vajpayee government took over two months ago, FIIs once again started investing in Indian markets. FII inflows were strong in February and March at $ 351 million. “Now with the sanctions and other measures, foreign exchange inflow into the countryis expected to come down. This is expected to weaken the rupee value against the dollar,” said an FII official.

After the downgrading of India’s foreign currency outlook by Standard & Poor’s on May 22, marketmen expect further selling pressure by FIIs. Even though weakening of the rupee will boost their earnings, FIIs prefer to wait and watch as they normally avoid any investment when the currency shows excess volatility. The FII selling is not restricted to the domestic market alone. FII sources said FIIs had sold heavily in the GDR market abroad. The Skindia GDR Index dipped by 7.21 per cent to close at 762.84 points on Wednesday as foreign investors booked profits. Market sources said much will depend on the Union budget to be unveiled on June 1. If the government takes measures to tackle the problems created by sanctions and S&P downgrade, there would be a fresh inflow of FII funds.