Foreign institutional investors (FIIS) pressed the panic button as global agency Fitch downgraded India’s credit profile to “negative”. Sensex, BSE’s 30-share benchmark index, dropped to lowest levels in 15 months as foreign funds sold shares worth Rs 702.50 crore on Tuesday alone.
ICICI Bank and HDFC Bank, two of India’s three largest banks, tumbled. Sensex fell 654.32 points, or 4.9 per cent, to 12,676.19. All stocks dropped on the index. NSE’s Nifty dropped 178.60 points, or 4.4 per cent, to 3,861.10.
“Money is flying out of emerging markets and inflows into India have been negative so far,” said Madhavi Vora of ULJK Securities, a broking firm. “There is a major liquidity crunch along with other external factors like political uncertainty that are ailing markets.”
This year, the FIIs have already pulled out more than a third of what they invested last year. As on July 15, 2008, FIIs were net sellers of Indian stocks worth Rs 28,048 crore.