The slow fall of the rupee continued to scare off global funds who invested in Indian equities, according to analysts. Recently, global funds representing investors from the United States and Europe had to pull out a total of US$1.4 billion worth of placements in the second quarter. Figures were provided by an unnamed investment firm.
Fund managers who risked venturing in the Indian market, including Franklin, JP Morgan, HSBC, Wisdom Tree, and Fidelity, removed their exchange-traded fund from local markets. According to investment advisor MSCI, India's investment index dropped by 5%. Furthermore, incoming funds to India from global investors declined by 16% in the second quarter.
According to financial observers, the 10% drop of the local currency, limited dollar influx and added pressure to investors in the Indian market predicts a bleaker picture for the local economy.
India's central bank, the Royal Bank of India, attempted earlier to adjust liquidity and interest rates to lure more investors. However,the central bank's moves to manipulate regulations were rendered useless since the more important issue was the continuing decline of the local currency according to analysts.
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