Overseas funds sold the most Indian shares over a two-day period since November 2011, contributing to a slide that has dragged the nation’s benchmark equity index to its lowest level in two months.
Foreigners sold a net $319 million of local shares on June 11 and 12, the highest since the two days ended Nov. 25, 2011, data compiled by Bloomberg show. The sales reduced this year’s net inflows into stocks to $15 billion, the data show.
Global stocks have lost some $2.5 trillion of their value since U.S. Federal Reserve Chairman Ben S. Bernanke said May 22 the authority may taper stimulus if the economy improves. While India’s S&P BSE Sensex has dropped 7.2 percent from more than a two-year high on May 17 and the rupee fell to an all-time low earlier this week, equities in the Philippines, Thailand and Indonesia slumped as foreign selling reached record levels. Overseas funds sold a net $2.7 billion from the three markets this month through yesterday, the biggest eight-day outflow since Bloomberg began compiling the data in 1999.
“Overseas funds are selling Indian stocks and shifting to less risky assets amid an atmosphere of uncertainty across the globe,” R.K. Gupta, who oversees about $816 million as a New Delhi-based managing director at Taurus Asset Management Co., said by phone. “A weak rupee can raise inflationary trends and pressure margins. That is also a concern for foreigners.”
Overseas investors sold $179 million of local shares on June 12, the most since Feb. 28, data from the regulator show. The rupee slumped to a record low of 58.9850 per dollar on June 11, weighed down by India’s current-account gap, and dropped as much as 1.3 percent today. The currency has slid 6.4 percent this quarter, making it Asia’s worst performer.
Finance Minister Palaniappan Chidambaram today signaled more policy changes to revive growth and said steps are being taken to stabilize the currency, seeking to build on the boost to sentiment from Fitch Rating’s move yesterday to upgrade the nation’s outlook to stable from negative, citing a nine-month reform push.
Indian equities may continue to attract foreign inflows, Derek Bandeen, Citigroup Inc.’s global head of equities, said in an interview with Bloomberg TV India today. This year’s net inflows of $15 billion are the highest after Japan among Asian markets tracked by Bloomberg. Foreigners plowed $24.5 billion into local shares in 2012.
“India is a place that captures people’s imagination; what this economy can grow to be and what this country can become,” he said. “It’s a natural place to put capital to work. You will continue to see strong flows.”
India’s gross domestic product grew 5 percent in the year ended March, the least in a decade. The global economy will expand 2.2 percent this year, the World Bank said yesterday, paring a January forecast of 2.4 percent.
India is “probably not growing as fast as it could, but I don’t know whether anybody is,” Bandeen said. The nation’s “great asset is the population; a large, educated and aspirational middle class that’s really capable of delivering on the global stage.”
Foreigners have been net sellers of Indian stocks in just two of the past 13 years, based on data compiled by Bloomberg going back to 2000. Inflows climbed to a record $29.3 billion in 2010, making the Sensex the best performer among the world’s 10 biggest markets that year. The largest-ever outflow in 2008, during the global financial crisis, triggered the biggest annual slump in the gauge of 52 percent.
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