FIIs pull out $1bn since B-Day

Mumbai: Foreign institutional investors (FIIs) have withdrawn over $1 billion from the stock market alone since the Budget was presented on July 6. To some extent, this huge selling has pulled each of BSE sensex and NSE nifty down by 10% during the same period. Although during the same period, domestic institutions—that include insurance companies, MFs and banks—have net bought stocks worth nearly $900 million, but this buying has failed to cushion the selling foreign funds, market players said.
    Data released by BSE and NSE showed that between July 6 and July 13, FIIs have net sold stocks worth Rs 5,241 crore, or nearly $1.1 billion at current exchange rate, while domestic institutional institutions (DIIs) have net bought stocks worth Rs 4,406 crore. This data, however, differs from the FII numbers released by Sebi which shows a net inflow during the same period. The difference is because the Sebi data also includes stocks bought by FIIs through the QIP and public offers, buybacks and also investments in unlisted companies, experts tracking FII/DII investments said.
    So in six trading sessions, FIIs withdrew about $180 million—on an average—from the market each day.
    As a result, institutional dealers pointed out that the rupee has depreciated against the dollar: From 47.89 on July 3, the last trading day before Budget, the rupee is down at 49.08 now.
    Although it is mainly the FII selling that has pulled the markets down since Budget, the FII index has fallen less than the sensex and the nifty. Compared to the 10.1% fall in these benchmarks, Instanex FII index has lost 9.7%.
    "Although there have been strong selling by FIIs, the relative outperformance of the FII index signals that the market could soon bounce back,'' said Gautam Chand, CEO, Instanex Capital. The company manages the sole FII index available in India.
    Soon after the Budget, dealers had said that FIIs with long-term investment mandate were awaiting further signals from the government on its economic policies. On the other hand, FIIs with a short-term objective of making quick profits, mainly the hedge funds that had entered India on expectations of a market-propping Budget, were contemplating exit. Dealers now say some of the FII-run exchange traded funds were also on sell mode, along with a host of short-term funds.
    Brokers are now looking for possible downgrades for India by any of the three ratings majors—Moody's, S&P and Fitch. "If that happens, more FIIs will withdraw from the (Indian) market,'' head of a local brokerage said. However, so far there have been mixed signals from the agencies on India's ratings in the short-term.