Mumbai: At least one in two companies in the BSE-500 index, comprising the top 500 firms listed on the Bombay Stock Exchange that account for 93% of India’s market capitalization, appear to have seen a decline in holdings by foreign institutional investors (FIIs) since January, the peak of the Indian bull market rally.

This conclusion is based on a Mint analysis of 173 stocks that have already disclosed changes in their stock ownership for the quarter ended September. Most analysts expect this number will rapidly grow as more companies report this data during the ongoing earnings results season.

Also See Pulling out (Graphic)

So far, FIIs have withdrawn $11 billion (Rs53,240 crore) from the Indian equities market, the first time in a decade when they have been net sellers. Last year, they had pumped in $17.8 billion, which had boosted the market to its highest ever levels in January.

The flight underscores the extent of foreign capital that has fled from India—and other emerging markets—in the midst of a global liquidity crisis that has seen the collapse of iconic institutions, such as Lehman Brothers Holdings Inc., and a government-led bailout of insurance and banking firms.

Others, such as Amitabh Chakraborty, president (equity) at Religare Securities Ltd, say the FII pull-out from Indian firms reflects an emerging downturn. “Economic growth (projections) have fallen to 7.5%, next it will be 7%," he says. “Markets are always forward-looking..."

About 105 of the 173 stocks that have released their data so far have seen their FII holdings fall in the last three quarters. This fall has largely been broad-based, with foreign investors withdrawing money across large- and mid-cap stocks. About 14 of the 30 stocks that make the Sensex, India’s most widely tracked index, and 23 of the 50 Nifty index stocks, are also in the same situation.

“Because of the global liquidity crunch, local arms (of FIIs) have been forced to liquidate their holdings in India," notes Nitin A. Khandkar, vice-president at Keynote Capital Ltd, a Mumbai brokerage.

“As far as the equity markets are concerned, the crisis is not of growth, but it’s a credit market crisis," says the head of research at a foreign brokerage, who didn’t want to be identified as he is not authorized to talk to the media. “Today, the issue is whether companies can borrow, can they grow? The pie is shrinking and shrinking fast." The list of firms that have been hit by the FII pull-out is dominated by 14 banks and seven information technology stocks.

Meanwhile, the Indian economy expanded 7.9% in the first quarter of the current fiscal year—the lowest since the third quarter of 2004-05—compared with 9.2% a year ago. With inflation hovering at a 13-year high, as prices of commodities and crude oil soared earlier this year, and due to the tight monetary conditions, experts continue to pare their gross domestic product growth predictions for the country.