Foreign funds have pulled out nearly Rs 3,400 crore from the Indian stock market so far in May, reversing the inflow trend of the past two months.
Foreign institutional investors (FIIs) withdrew Rs 3,397 crore or $763 million from the Indian equity so far this month, the data with the market regulator Securities and Exchange Board of India (Sebi) reveals.
During the month of April and March, overseas players were net investors of equity to the tune of Rs 7,213 crore and Rs 6,749.60 crore respectively.
Experts believe the pullouts by the FIIs would continue through May as interest rate pressure still remain on companies.
"FIIs withdrew their position from the stocks of those companies which could see some impact due to the RBI's hike in interest rates. Interest sensitive stocks will continue to see pullout throughout this month," Geojit BNP Paribas Research Head Alex Mathew said.
Experts feel some foreign investors may have shifted to the government securities which besides providing higher returns is considered a safe bet in uncertain market conditions.
At the same time, FIIs were bullish on debt market and made an investment of Rs 3,957.90 crore during the period under review. This takes the overall net investment by FIIs into stocks and bonds to a total of Rs 560.90 crore this month.
Significantly, in May the secondary market barometer in the Bombay Stock Exchange's Sensex fell by three% to below the psychological level of 19,000. Sensex ended at 18,531.28 points in the last trading session at Friday.
This has taken the gross purchases of equities in the country by FIIs so far this year to over Rs 2.44 lakh crore. After taking into account the outgo of Rs 2.43 lakh crore, overseas investors have made a net investment of Rs 1.31 crore.