FIIs may turn net sellers under flu impact: Moody's

Swine flu scare could make foreign institutional investors pull out money from Indian equity markets even though they remained net investors in March and April this year, says Moody's.

"Asset prices are bound to retreat if the outbreak (of swine flu) worsens and discourages investment...although a net capital inflow into equities occurred in April, another round of net outflow cannot be ruled out," says Moody's economy.com

Under the impact of global financial turmoil, FIIs withdrew Rs 6,681 crore (Rs 66.81 billion) from Indian equities in two months - January and February - even though curbs on participatory notes were lifted a few months before.

However, they returned to markets next month and remained net investors to the tune of just Rs 530 crore (Rs 5.30 billion) in March. In April, they bought stocks worth Rs 6,508 crore (Rs 65.08 billion).

However, Moody's described the investor sentiment that led to positive net inflow from FIIs in April as "still fragile".

It said although India itself may not have upset investors, a general decline in confidence worldwide could spark repatriation of funds from stock markets.

"This will not only be a drag on stock prices, but will again exert downward pressure on rupee," Moody's said.