FII monthly outflow nears 3-year high at Rs 11,222 crore

The FII participation has a strong co-relation with the Indian equity market performance. With the outflow of FII money to the tune of Rs 11,222 crore in the month of August,the Sensex at the Bombay Stock Exchange in the same period has fallen by 12.9 percent.

On Friday alone the net FII outflow stood at Rs 1,494 crore and the Sensex fell by 1.8 percent.

Experts say that there is a feeling of general risk aversion in the market and they money coming back in the short-term is unlikely.

“All indicators show that FII and domestic investors are moving from risk neutral to risk aversion zone. There is stress in many markets and especially in short term dollar funding in Asia and Europe,” said Ramit Bhasin,MD and head of markets at RBS.

FII’s have grown even more wary of the Indian markets since the Reserve Bank of India went for an unexpected 50 basis point hike in the repo rate in July.

“Until June,our FII clients were excited about the fact that RBI is coming to an end of the rate hike cycle but with a 50 basis points hike in repo and inflation continuing to remain high that excitement has turned into caution. The fast money accounts have closed their long positions and are in a wait and watch situation as the impetus for markets to improve in the near term has gone away,” said Bhasin.

Market players however say that the downside is limited now and the long term money has started to make an entry at the current levels as the markets are starting to look cheap at these levels.