Foreign institutional investors (FIIs) have offloaded shares worth $1.30 billion (about Rs 5,829.40 crore) in the Indian equity market so far this month, as stock markets were rattled by global economic uncertainty.
During the August 1-12 period this year, overseas investors purchased equities worth a gross amount of Rs 22,958.30 crore.
However, they also sold shares valued at Rs 28,787.70 crore in the same period, translating into net sales of shares worth Rs 5,829.40 crore during the period, according to data available with the Securities and Exchange Board of India (Sebi).
Market analysts believe the heavy selling by FIIs was triggered by the downgrade of the US credit rating, which led to panic among investors fearful of another recession in the world’s largest economy.
“FIIs were withdrawing money from the country’s equity market as fears of possible recession in the world’s largest economy, the US, and debt problems in the euro zone gripped investors across the globe,” CNI Research Chairman & Managing Director Kishore Ostwal said.
At the same time, overseas investors withdrew $336 million, or Rs 1,472.60 crore, from the debt market.
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The Bombay Stock Exchange Sensex has declined by over 7 per cent so far in August to close the week ended August 12 at 16,839.63 points from a recent high of 18,871.29 on July 25, 2011.
The benchmark index has lost nearly 18 per cent in the 2011 calendar year.
So far this year, FIIs have pumped in Rs 4,871.10 crore, or $1.13 million, into the Indian stock market, compared to about $29.4 billion in 2010.
Battered Asian financial markets were hoping foreign inflows would return to their equity markets once the dust settled down from the current panic selling, market players said.
“Once the panic sell-off ends, the Indian market will continue to attract foreign investors,” Ostwal added.
There are a total of 1,740 foreign funds registered with Sebi.