Foreign institutional investors (FIIs) are in an exit mode. They have pulled out over Rs 100,000 crore from the equity cash market since the middle of October 2007, while their daily turnover has declined by around 800 basis points during the same period.
Concerns over the sub-prime crisis causing a further collapse in the banking sector, leading to more credit losses and asset writedowns worldwide has affected the FII sentiment. This has severely dented inflows into the emerging equity markets. The data compiled by EPFR Global (Emerging Portfolio Fund Research) suggest that investors have pulled out almost $29 billion from the emerging equity markets this year.
The data on foreign portfolios in the emerging Asian markets show that FIIs were buyers only in the Indonesian and Vietnam markets.
They offloaded $31.293 billion in South Korea, $11.148 billion in Taiwan and $3.63 billion in Thailand. The provisional data compiled by BSE and NSE suggest that FIIs were net sellers in the secondary markets to the tune of Rs 75,700 crore ($17.5 billion) so far in this calendar year.
FIIs hit by the sub-prime crisis were the biggest sellers in the Indian market. Citigroup Global Markets, Goldman Sachs Investments, HSBC, Merrill Lynch Capital Markets, Morgan Stanley and Swiss Finance Corporation, investment arms of US-based merchant bankers are estimated to have sold out Rs 35,000 crore of equity during this period under review, making up 56.5 per cent of the total FII withdrawal.
Citigroup, which reported losses of around $18 billion in the sub-prime crisis, reduced its holdings in 47 companies to below 1 per cent in the last six months. Bear Stearns Asset Management (BSMA), which posted losses of $3.2 billion, sold most of its stake in Indian companies.
BSMA’s holding in as many as 50 companies declined to below 1 per cent. Morgan Stanley, Merrill Lynch Capital, HSBC, Goldman Sachs and Swiss Finance Corporation each reduced their holdings in 30 companies to below 1 per cent.
