Foreign institutional investors have pulled out over Rs 2,000 crore (Rs 20 billion) from the Indian markets in just two trading sessions in March, while increased risk aversion evident among equity investors worldwide is continuing to weigh on the market sentiments.
"Flows into EPFR-tracked funds during the final week of February again reflected the increased risk aversion evident among equity investors since the beginning of the year, a trend that is likely to gain further impetus from the route of global stock markets going into March," the Emerging Portfolio Fund Research report said.
Investors have pulled out over $100 million out of the BRICS Equity Funds that invest in Brazil, India, Russia and China, though it is only the second week of outflows from these funds this year.
The Bombay Stock Exchange's 30-share benchmark index, Sensex, has lost over 2,000 points since its peak of over 14,724 on February 9, primarily on global market woes and huge selling by foreign funds. The Sensex on Monday hit an intra-day low of 12,344.44 on the BSE.
While, investors have continued to pull money out of China and Greater China Country Funds, about $205 million of net outflows from these funds has brought the total outflows from February 7 to $880 million.
The geographically diversified Global Emerging Markets Equity Funds suffered the biggest hit, with the $637 million pulled out of these funds representing 0.39 per cent of their beginning of week assets.
But Latin America Equity Funds, which posted a collective loss for the week of 7.17 per cent, only suffered $23.6 million worth of redemptions for the week.
"With a long period of strong liquidity into China related funds turning to outflows in recent weeks and our country flow data showing that equity funds were net sellers of Chinese equities in January for the first time in many months, a correction in China was not unexpected, says Brad Durham, managing director of EPFR.
"What was unexpected was the global reaction to it as markets nearly everywhere suffered a sharp sell-off, reminiscent of the downturn in May last year. Welcome to the Asian century, since this time it was not the usual interest rate expectations or inflation data that spooked investors globally into taking profits but a sharp fall in Chinese equities," Durham added.
