According to data released by SEBI last week, FIIs’ asset base shrank to Rs 6,29,647 crore towards the end of June from Rs 10,27,141 crore recorded at the end of 2007. The benchmark, BSE Sensex, declined 28 per cent in this period while the broad-based BSE-500 and the BSE Mid-cap indices are down 36 and 48 per cent respectively.

SEBI released this data for the first time on Friday.

According to Mr Gul Teckchandani, an independent strategist, some of the investments FIIs made in mid-cap stocks at the peak are still quoting 50-75 per cent lower from that level. This explains the slightly larger value erosion of FIIs’ asset base.

According to SEBI data, FIIs were still net sellers to the tune of Rs 28,683.6 crore in the 18-month period, despite their buying stocks worth Rs 24,303 crore in 2009 (till June).

In the first half of 2009, overseas investors’ portfolio appreciated by 51 per cent.

At the end of June, their asset base jumped to Rs 6,29,647 crore from December 2007 figure of Rs 4,17,470 crore.

FIIs’ holdings through participatory notes (P-Notes) have also come down sharply in the 18-month period ended June.

As against 37-38 per cent of assets under management in December 2007-January 2008, investments through P-Notes tumbled to 15.5 per cent this year.

P-Notes are instruments used by foreign investors or hedge funds that are not registered with SEBI to invest in Indian securities.

In absolute terms, investments through P-Notes peaked in October 2007 at Rs 4,49,613 crore.

SEBI had then imposed restrictions on the issue of these instruments due to fears of excessive volatility in stock and currency markets due to the deluge of money entering the stock markets through this route.

Though the absolute value of investments through P-Notes is down in 2009, a sharp spike in the number of P-Notes outstanding was noticed towards the end of May, leading to the assumption that part of the post-election surge in equities could be due to short-term capital inflows in the form of P-Notes.

“Going forward, India would continue to see large inflows… and lot of India-focused funds, including hedge funds, would be created,” Mr Teckchandani added.