Investments of the Foreign Institutional Investors fell 23% in Six Months

The double impact of rupee depreciation and the slide in the sensex led to a 23% fall in the value of investments of the foreign institutional investors (FIIs).

The rupee has depreciated a staggering 15.6%, from the 45 level to 52 in six months. Therefore, when calculated in dollar terms, the value of all FII investments which were bought at least six months ago has also been reduced by the same percentage. the market in general has fallen with the sensex currently down by 11.2% from the 18000 level to just below 16000. In dollar terms, the total loss is a staggering 23.2%.

The fall in the valur of the FIIs was attributed to the RBI’s statement that it would not intervene in the foreign exchange market. RBI’s statement gave speculators the leeway to speculate against the rupee and have conveyed a wrong signal to FIIs.

On a net basis, FIIs have already taken out about Rs 2,700 crore (a little over $500 million) from the secondary market in the last five sessions. While FIIs of European origin are eager to take money out of India and remain in cash fearing further weakness in their home market, USbased FIIs are taking money out and converting it into dollars.

According to market dealers, FIIs would return only if the government can quicken its decision making process and is successful in instilling investor confidence.