FIIs take hit of Rs 2 lakh cr in 2011

Pitted against a falling rupee and plunging share prices, foreign investors are estimated to have taken a hit of over Rs 2 lakh crore in 2011 on investments in Indian stock markets. Once a darling of overseas investors for its impressive returns, the Indian equity market turned into a money-guzzler for foreign institutions in 2011. The outlook does not seem bright for the new year as well.

According to the Securities and Exchange Board of India (SEBI), FIIs purchased stocks worth Rs 6 lakh crore during 2011, but sold shares worth a higher amount, resulting into net outflows of over Rs 2,700 crore for the year. In comparison, Indian equities had witnessed net FII inflows of Rs 1.3 lakh crore in 2010.

Also, FIIs took a 36 per cent hit on their investments in 2011, as measured by the BSE Dollex index (which tracks the barometer index Sensex in terms of the US dollar for foreign investors).

Taking into account the gross purchase of shares worth Rs 6.11 lakh crore by FIIs in 2011, the total hit for them is estimated at over Rs 2 lakh crore. They accounted for about 10 per cent of the total losses worth Rs 19.45 lakh crore for the entire stock market. The capital poured in by the FIIs is often been called ‘hot money’ because of its unpredictability, but these overseas entities have still been among the most important drivers of Indian stock markets.

FIIs were seen shifting loyalty to the debt market in 2011, with an infusion of Rs 42,067 crore. This helped India get a net FII inflow of Rs 39,353 crore for the year, taking into account both stocks and debt securities. According to experts, fears of a a global economic slowdown and domestic troubles with inflation, interest rates, lack of reforms and the falling rupee collaborated to make the foreign investors cautious in 2011.

Destimoney Securities’ Managing Director and CEO Sudip Bandyopadhyay said, “Euro zone worries have pushed the Indian market into a risk aversion mode. Other emerging countries are performing better than India and so, FIIs are staying from our market.”

Experts said outflows was seen in most sectors, but interest rate sensitive ones like auto, banking and realty were among the worst hit.

“Barring FMCG and some blue-chip stocks, almost all sectors saw money being pulled out. In addition, the rate sensitive stocks like banking, realty and auto were severely hit,” CNI Research Head Kishor Ostwal said.