Overseas investors pulled the most money out of Indian equities in a two-day period since November 2011, contributing to a slide that sent the nation’s benchmark stock index to its lowest level in two months.
Foreigners sold a net $319 million of local shares on June 11 and 12, the highest amount 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.
Overseas fund flows have dragged the MSCI Emerging Markets Index 9 percent from May 22 when U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank may taper stimulus if the economy improves. India’s S&P BSE Sensex has dropped 6 percent from a two-year high reached on May 17, and the rupee fell to a record this week. Investors pulled $8.5 billion from global stock funds in the week to June 12, according to Citigroup Inc.
“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 yesterday. “A weak rupee can raise inflationary trends and pressure margins. That is a concern for foreigners.”
The Sensex jumped 1.2 percent to 19,057.3 at 11:32 a.m. in Mumbai, heading for its biggest gain since May 27. The measure yesterday closed at its lowest level since April 14.
Overseas funds 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. The currency has slid 6.2 percent this quarter, making it Asia’s worst performer.
Finance Minister Palaniappan Chidambaram signaled more policy changes to revive growth yesterday and said steps are being taken to stabilize the currency. The government is seeking to build on the boost to sentiment after Fitch Rating upgraded the nation’s outlook to stable from negative on June 12.
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 yesterday. This year’s net inflows are the highest after Japan among 10 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 this week, 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.