FIIs pull out $13 bn in 2008

With Indian stocks melting under the heat of a global crisis, overseas investors pulled out three dollars in 2008 from every four pumped in the previous year and a reversal in trend is expected only after six months.

During a year when Indian stock market lost its valuation by more than half, the foreign institutional investors (FIIs) have pulled out an estimated $13 billion from the domestic bourses -- an amount equivalent to nearly three- fourth of over $17 billion invested in 2008.

With stock market losing big time during 2008, the FIIs seem to have shifted their loyalty to debt market in the country, where they made net purchase of over $3 billion during 2008 -- a sharp surge from about $2 billion a year-ago.

Analysts believe that FII inflows might pick up again in the country in the coming year after the first two quarters in 2009 as Indian stocks valuations have become quite attractive for long term investments.

"The FII outflow is likely to continue for the first two quarters in 2009 but the situation is likely to improve in the second half of this year. Inflows from Japan are likely to come into the domestic market as the interest rates are down to virtually zero, while launch of Shariah stock index may also attract some funds," Geojit Financial Services research head Alex Matthews said.

"The FIIs outflow is likely to gradually taper off and they will start putting in money in the coming year as the valuations of Indian stocks have become attractive and the weakening rupee against the dollar would attract them to invest more in the country," brokerage firm Bonanza Portfolio President Research P K Agarwal said.