After pulling out over Rs 1,100 crore from the Indian equity market in last month, overseas investors have withdrawn funds to the tune of Rs 435 crore in May so far.
During May 2-25, Foreign Institutional Investors (FIIs) made gross purchase of equities worth Rs 36,228 crore and sold shares valued at Rs 36,663 crore translating into a net outflow of Rs 435 crore, according to data available with the market regulator Sebi.
Market experts attributed the outflow to a slew of reasons such as depreciating rupee, high fiscal deficit and the current account deficit as well as lack of reform momentum.
"Foreign investors are staying away from the Indian equity market, despite an attractive valuation, mainly on account of weakness in rupee, which is hovering around the Rs 56-level against US dollar," a broker said.
Last month, FIIs pulled out Rs 1,109 crore from the stock market amid S&P lowering India's credit outlook to negative from stable.
In May so far, while foreign investors took out a total of Rs 435 crore from stocks, they seem to be bullish on the debt market. This is because FIIs poured in Rs 1,660 crore taking the collective net investment into stocks and bonds to Rs 1,225 crore during the period.
BSE benchmark Sensex has lost around six per cent so far this month to close at 16,217.82 points on Friday.
After taking the latest withdrawals into account, FIIs have made an investment of Rs 42,407 crore into the equity market so far this year and Rs 17,270.40 crore into the debt market during the same period.
However, in the first three months of 2012, FII had invested a record Rs 43,951 crore. Of this, Rs 10,358 crore was poured in January, Rs 25,212 crore in February and the rest Rs 8,381 crore in March.
The strong FII inflows in January-March period was attributed by market participants to the Reserve Bank of India's (RBI) pause in rate hikes and the improving liquidity position.
As on May 25, the number of registered FIIs in the country stood at 1,754 and total number of sub-accounts were 6,335 during the same period.