FIIs pull out $1b in May on weak Re, rising oil

MUMBAI: Foreign institutional investors (FIIs) have been big sellers in the Indian market this month, pulling out $1.2 billion (over Rs 5,000 crore). This is the fifth-highest monthly outflow in history that came on the back of a weakening rupee, rising crude oil prices and a sliding market.
In May, the Sensex has given up its gains each time it neared the 18K level and the index is down 5% as global crude oil prices hit new peaks, closing in on the $135 per barrel mark.Crude being the biggest import item for India, the rising prices affected the rupee that weakened sharply to a 13-month low of 43 to the dollar.
The lacklustre performance of the equity markets coupled with the depreciation of the rupee has been a major dampener on trading sentiment of these investors, who have been extremely risk averse in 2008. As possibilities of a US recession cropped up and global markets became choppy in January, investors had started to pull out of risky investment avenues like emerging markets, preferring instead to put money into more developed economies.
The developments this month have done nothing to boost sentiment as the foreign players face a double threat - losing money in the markets and then again when converting the domestic currency into dollars.
For every dollar they brought in earlier in the month and converted to rupee when the exchange rate was 39, now they will have to pay more rupees for every dollar. In addition, in a sliding market their portfolio value would also go down.