FIIs log worst February sell off in Indian equity market

Foreign institutional investors (FIIs) logged the worst February sell off of Rs 18,619 crore on global markets getting the aftershocks of a correction in their US counterparts after US bond yields rose to record highs. The Sensex and Nifty fell nearly 4.8% each in February negating the robust start the indexes logged in the previous month. The indices hit their all-time highs of 36,443 and 11,171, respectively on January 29 in anticipation of a farm friendly Budget and strong corporate earnings.

Indian markets took a hit after the government imposed 10% Long Term Capital Gains (LTCG) tax on trading in equities which dampened investor sentiment.

Foreign fund managers shifted capital from emerging to US markets to take advantage of the interest rate differential in the global markets. US govt bonds regarded as the safest securities for investors with lesser risk potentials, regular returns and backed by the government of the world's largest economy became the flavour of this month.

Interestingly, domestic institutional investors (DIIs) infused Rs 17,813 crore into Indian equities when FIIs pulled out Rs 18,619 crore seeking better returns for their investment last month.

The second worst sell off by FIIs occurred in February 2016 when they sold stocks stocks worth Rs 12,513 crore in Indian markets.

A fear of reduction in India's weightage in MSCI after the index provider called BSE and NSE's move to stop providing data to foreign exchanges as 'anti-competitive' also weighed on the sentiment.

During the last 12 months, DIIs reposed faith in the Indian economy except in March 2017 when they were net sellers of stocks worth Rs 4,395 crore even as FIIs pumped in Rs 26,473 crore into equities.

Buying activity was the highest in September 2017 when DIIs infused Rs 21,025 crore into the Indian equity market. FIIs pulled out Rs 23,969 crore during the same month.