Foreign institutional investors (FII) will continue selling Indian equities for investing in the more profitable north-east Asian markets till mid-2011, Australian investment bank Macquarie said today.
"India will continue to be seen as a funding source for investments into the South Korean and Taiwanese markets," Michael Kurtz, the bank's head of strategy for Asia, told reporters here.
According to Rakesh Arora, Macquarie's Head of Research for India, the net outflow of FIIs within the first six weeks of the year stood at $2 billion against the record $29 billion of net inflows last year.
The BSE Sensex, which today gained 473 points to end at 18,202 level, so far has had a volatile 2011, and India counts as one of the worst performing global markets, second only to the politically strife-torn Egypt.
High inflation and political uncertainties in scam-hit India are among the factors forcing the FIIs to rework their India strategy, Arora said, adding the latter was the more disturbing factor among the two.
Kurtz said improvement in the economic scenario in the developed world, coupled with low valuations, had made some export-oriented stocks in South Korea and Taiwan in the information technology and consumer durables sectors very dear to the global investors.
"In relative terms, India stands to be a loser here," he said, adding an improvement in the domestic scenario can result in investors re-looking their India strategy in the second half of the year.