FIIs pull out $2.5-bn in Aug from Indian capital mkts

Overseas investors have pulled out nearly Rs 16,000 crore (about $2.5 billion) from the Indian capital markets in August -- the lowest outflows in three months -- amid concerns over the depreciating rupee.

The outflows were about Rs 9,773 crore ($1.55 billion) from the debt market and Rs 5,922 crore ($902 million) from equities translating into a net outflows of Rs 15,695 crore ($2.5 billion), as per latest data available with market regulator Sebi.

This is the lowest net outflows from the Indian capital markets since June, when Foreign Institutional Investors (FIIs) had pulled out a record Rs 44,162 crore ($7.5 billion).

In July, FIIs had withdrawn over Rs 17,000 crore ($3 billion) from the debt and equities markets.

Foreign investors continued to pull out of India, which has been facing stiff economic challenges, depreciating rupee and volatile global markets, however, outflows have slowed, market analysts experts noted.

According to the US-based fund tracker EPFR, "redemptions from fund groups tied to two markets attracting more than their share of negative headlines, India and Indonesia Equity Funds, were moderate."

The rupee slumped to a lifetime low of 68.85 (intra-day) against the US dollar on August 28. Since April 30, the rupee has depreciated by about around 22%. The currency closed at 65.70 against the dollar on Friday.

There has been turmoil in the global markets after the US Federal Reserve said it may taper the $85-billion-a-month bond purchase programme later this year and end it next year if the US economic recovery is up to its expectations.

The Fed's ultra-loose monetary policy has driven asset prices higher, including those in emerging markets, and fears are that inflows may be hit if the US monetary stimulus comes to an end.

So far this year, foreign investors have infused a net Rs 60,170 crore ($11.6 billion) from equities, while overseas investors have withdrawn nearly Rs 31,000 crore ($4.7 billion) from the debt market.