According to the SEBI (Securities and Exchange Board of India) data, foreign institutional investors (FIIs) bought equities worth Rs. 424.43 billion and offloaded stocks worth Rs. 427.91 billion in May, translating into a net outflow of Rs. 3.47 billion.
Market experts said that depreciating rupee, high fiscal and current account deficit and lack of reform momentum led to the outflows. India’s current account deficit is at 4% of the GDP, while fiscal deficit stands at 8.4%-8.8%. India’s rupee has fallen 12% from its 2012 peak, is off 20% from its 12-month high, and is among the worst-performing currencies YTD (year-to-date).
FIIs had pulled out Rs 11.09 billion from the stock market in April amid S&P lowering India's credit outlook to negative from stable. The S&P has said, India’s high fiscal deficits and a heavy debt burden remain the most significant constraints to its sovereign rating. The weak macro fundamentals are exacerbated by lack of policy decisiveness.
However, overseas investors purchased Rs. 35.69 billion in bonds in May, indicating their bullish stance. The BSE (Bombay Stock Exchange) benchmark’s Sensex lost 6% to 1,100 points to close at 16,218.53 points on the last trading session of May.
After taking the latest withdrawals into account, FIIs have made an investment of Rs. 418.60 billion into the equity market so far this year and Rs. 217.01 billion into the debt market during the same period. The number of registered FIIs in the country stood at 1,754 as of 1st June, while sub-accounts were 6,334.