Overseas investors purchased equity and debt securities worth a gross quantity of Rs 69, 590 crore, but also sold securities worth Rs 77, 493 crore throughout the month— translating into a net outflow worth Rs 7, 902. 50 crore, or even $1. 76 billion, during the period.
According to data available with the actual Securities and Exchange Board of India (Sebi), this was the highest month-to-month net sales by FIIs since October, 2008, when they were net retailers of equity and debt of Rs 13, 489 crore.
The FIIs turned net sellers in August this season after two consecutive months of net inflows. During the months of 06 and July, overseas players pumped in net amounts of Rs 4, 883. thirty crore and Rs 10, 652. 90 crore, respectively, into Indian markets.
Market analysts believe the heavy selling by FIIs was triggered through the downgrade of the USA's credit rating, which led to a panic among investors fearful of another recession within the world's largest economy and deepening of the financial crisis in European nations.
"FIIs are waiting for any trigger in the market... Market is still within the consolidation mode. They are also looking for the RBI's review policy upon September 16, " CNI Research CMD Kishor Ostwal said.
The heavy selling by FIIs was the key reason for the Bombay Stock Exchange benchmark Sensex losing 1, 500 points within August, with investor wealth eroded by Rs 5, 55, 650 crore— the largest monthly loss since January, 2011, when the market had lost a small over Rs 7, 00, 000 crore.
FIIs were bullish on the financial debt market and made an investment of Rs 2, 931 crore during the time under review, while pulling out Rs 10, 831 crore from the collateral market, Sebi noted.
So far this year, FIIs have pumped Rs nineteen, 531 crore into the stock and bond markets, compared to about Rs 1, seventy nine, 674 crore in the whole of 2010.
The number of FIIs authorized with Sebi stood at 1, 735 as of August this year.