FII outflow in Aug highest since Lehman collapse

Foreign institutional investors (FIIs) have displayed their highest monthly withdrawal from Indian shares since October 2008, when Lehman Brothers filed for bankruptcy.

They had net-sold Indian shares worth Rs 10,214 crore ($2.25 billion) till August 29, show data from the Securities and Exchange Board of India (Sebi), compiled by the Business Standard Research Bureau. The last time they sold more in a month was in October 2008, when they were net sellers to the tune of Rs 14,248.6 crore ($2.93 billion).

Fears of a double-dip recession in the US and a worsening debt crisis in the euro zone wiped off almost $5 trillion from equities worldwide in August, according to Bloomberg. In India, too, stock market investors’ wealth eroded by Rs 5,58,327 crore in this month.
 

PULLING OUT FIIs net investment in Equity market
Month	Rs  crore	$ billion
Jan	-6,330.30	-1.39
Feb	-3,754.30	-0.83
Mar	6,967.00	1.56
Apr	7,018.50	1.57
May	-5,158.20	-1.16
Jun	3,310.90	0.73
Jul	7,411.20	1.67
Aug*	-10,214.80	-2.25
* Till August 29                                   Source: Sebi Compiled by BS Research Bureau

Heavy selling from FIIs dragged the Bombay Stock Exchange (BSE) benchmark, the Sensex, down by 1,520 points or 8.4 per cent in August, its worst monthly loss since January. The 30-stock index, which last closed at 16,676.75 on Tuesday, has gained five per cent in the last two trading sessions, following strong global markets on speculation that the US Federal Reserve would give more stimulus to protect the economic recovery. However, investors are not yet fully confident, at least in the short term.

“The mood is still very cautious. There was redemption pressure across emerging markets in August. However, a lot of negative global news flow has been discounted,” said Sam Mahtani, director, emerging market equities, F&C Asset Management, London. “There is a lot of value in the Indian equity market after the correction. We have been increasing allocations to India over the past eight weeks and will continue to add to high-quality companies if there is further weakness. India is now a key overweight country in our global emerging market portfolios.”

Mahtani likes stocks like ICICI Bank, TCS, Infosys, Coal India and M&M in India and expects these to deliver a more than 20 per cent return in 12 months.

Over the next few weeks, market woes are likely to continue due to the euro zone debt crisis and fears of a recession in the US. “In the past month, global tail risks have come to the fore, pressuring the market further – the euro crisis is likely to grab mindshare over the next few weeks. Meanwhile, the probability of a US recession is also rising. Our US economist has raised his recession probability to 40 per cent,” said Jyotivardhan Jaipuria, head of India research at Bank of America Merrill Lynch, in a strategy note to clients.