The returns for foreign institutional investors (FIIs) so far this year have been the worst in last decade despite a record Rs 1 lakh crore of net equity buying for the third time in last 4 years.
For every Rs 100 crore they invested, the Sensex rose by an average 1.57 points this year to date.
This is the lowest in the last decade for any calendar year that has seen inflows.
Even as FII inflows to Indian equity markets on Friday crossed the Rs 1-lakh crore mark (Rs 1,00,570 crore year till date) for the third time in history, the benchmark inched up by a mere 8.08% or 1,570 points since the start of this calendar year.
The bang for the buck has been much higher in the earlier two instances when the FII inflows had crossed Rs 1 lakh crore in the year 2010 and 2012 respectively. The year 2010 witnessed FII inflows of Rs 1,33,266 crore but the Sensex rose by 2.28 points for every Rs 100 crore pumped in by FIIs.
Similarly for the year 2012 where FIIs pumped Rs 1,28,360 crore, the Sensex had gained 3.09 points for every Rs 100 crore of FII inflows.
Blame it on huge counter flows by domestic institutional investors (DIIs) that have pulled out record Rs 69,224 crore money due heavy redemption pressures and lack of new inflows.
Gopal Agrawal, CIO at Mirae Asset Global Investments, says lack of retail participation, due to high inflation and volatile markets, led to massive DII selling which in turn led to a significant slide in 2013 returns despite record FII flows.
In dollar terms too, the returns this year for FIIs so far have been one of the worst in the decade despite net positive inflows. The BSE Dollex 30 is currently down 4.1% since the start of 2013 which is the lowest return in the decade barring 2008 (-61.4%) and 2011 (-36.7%) - both of which had witnessed outflows.
In fact the Rs long-only’ foreign investors have not made any money in Indian markets during the last six years, say experts.
Piyush Garg, CIO at ICICI Securities says that while the index is just trading 3-4% higher than its 6- year levels, the actual returns in dollar terms have been hugely negative for them at over 40%.
“While for domestic investors, equity markets have massively underperformed giving negative inflation adjusted returns of negative 40%, foreigners too have seen a hit due to domestic currency depreciation of nearly 55% in last six years which have hit them hard,” he said.