FIIs offload shares worth $1.5 bn in first 12 days of August

Foreign institutional investors (FII) 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.

In August 1-12 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's 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 eurozone gripped investors across the globe," CNI Research CMD Kishore Ostwal said.

At the same time, overseas investors withdrew $336 million, or Rs 1,472.60 crore, from the debt market.

The BSE Sensex has declined by over 7% 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% 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 are hoping to retain foreign inflows into their equity markets once the dust settles 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 the Securities and Exchange Board of India.