The Securities and Exchange Board of India (SEBI) has released a data showing that almost INR291.91 billion (over US$5 billion) worth of debt and equities have been pulled out by foreign institutional investors (FIIs) in the month of June 2013.
According to the SEBI data, between 3 and 21 June, the FII have bought debt securities worth INR83.85 billion, while they sold bonds about INR325.49 billion, which indicated a total outflow of INR241.63 billion.
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According to the report, FIIs, in the month of June 2013, have pulled out INR50.28 billion from the equity market alone.
The report highlights that this sudden pull-out of debt and equities have been due to a fall in the rupee value. According to market experts, the weaker rupee led to the rise in the cost of hedging a volatile rupee, which has shrunk the yield margin the FIIs work with, forcing them to draw their funds.
In the past few days, the INR has witnessed steep fall in value viz-a-viz US dollar and has depreciated by over 10% from 30 April 2013. The currency touched an all time low of 59.27 against dollar on 20 June 2013.
The SEBI’s report claims that India still has substantial amount of investments by FIIs, which amounts to about INR781.76 billion. As on 21 June 2013, the number of registered FIIs in India stood at 1,761, and that of sub-accounts stood at 6,399.
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By GlobalDataAnalysts believe that this frenzy in the global market is the result of the US Federal Reserve’s announcement of the possibility to taper US$85-billion-a-month bond purchase from later this year through 2014, if US economic recovery is up to its expectations.
In the past, the government of India had taken a number of steps to make FIIs investment rules more lenient, such as doing away with sub-limits and reducing the withholding tax on debt investments, to lure FIIs.
