FIIs pull out $13.5 billion

Foreign institutional investors (FIIs) seem to have been left with no option but to pull the plug from the Indian market.

According to the National Stock Exchange (NSE), FIIs have pulled out Rs 53,448 crore ($13.5 billion) between November 2007 and February 14, 2008, which is 20 per cent of their cumulative investment in India till date. FIIs have been selling continuously since November and the pace was ramped up in January, when they sold a net Rs 29,448 crore of Indian stock.

The NSE brass, appearing before the parliamentary standing committee on finance, have said the withdrawal is greater than the net investment by the foreign portfolio investors in any year barring 2007, during which they pumped in a net Rs 71,951 crore.

Interestingly, the numbers put by the NSE and the Bombay Stock Exchange are far greater than those put out by the stock market regulator, the Securities and Exchange Board of India (SEBI). According to SEBI, the net withdrawal by FIIs in the November-February period was Rs 13,5876 crore.

A SEBI official said some of the discrepancy could be explained by the fact that the numbers issued by the stock exchanges did not include investments in the primary market. “The stock exchange figure are based on secondary market transactions. However, the gap should not be so wide and needs to be investigated,” he added.

Even including the total mobilisation in the primary market, the data cannot be reconciled.

According to SEBI, FIIs have made a cumulative net investment of $66.5 billion since 1992. The withdrawal over the last three months of $13.5 billion (the NSE and BSE numbers) is exactly 20 per cent of this investment.

The question remains whether the FIIs’ withdrawal process is over. The situation was still fluid in the US where the sub-prime crisis had spilt over to other parts of the financial sector, said Amitabh Chakraborty. “We are still not out of woods,” he added.

The State Bank of India, in its presentation, said stock markets were likely to remain volatile for the next six months, as there was no clarity about the losses that the financial industry would have to bear because of the recent turmoil.

Banks such as Citigroup and Merrill Lynch had booked losses, but other entities like bond insurers were also in trouble and had started declaring losses, the country’s largest bank pointed out.