Foreign funds pulled out nearly Rs 8,000 crore, or USD 1.8 billion, from the Indian stock and debt market in August, the highest monthly withdrawal since October, 2008, market regulator Sebi has disclosed.

Overseas investors purchased equity and debt securities worth a gross amount of Rs 69,590 crore, but also sold securities worth Rs 77,493 crore during the month — translating into a net outflow worth Rs 7,902.50 crore, or USD 1.76 billion, during the period.

According to data available with the Securities and Exchange Board of India (Sebi), this was the highest monthly net sales by FIIs since October, 2008, when they were net sellers of equity and debt of Rs 13,489 crore.

The FIIs turned net sellers in August this year after two consecutive months of net inflows.

During the months of June and July, overseas players pumped in net amounts of Rs 4,883.30 crore and Rs 10,652.90 crore, respectively, into Indian markets.

Market analysts believe the heavy selling by FIIs was triggered by the downgrade of the USA’s credit rating, which led to a panic among investors fearful of another recession in the world’s largest economy and deepening of the financial crisis in European countries.

“FIIs are waiting for any trigger in the market… Market is still in the consolidation mode. They are also looking for the RBI’s review policy on September 16,” CNI Research CMD Kishor Ostwal said.

The heavy selling by FIIs was the main reason for the Bombay Stock Exchange benchmark Sensex losing 1,500 points in August, with investor wealth eroded by Rs 5,55,650 crore — the biggest monthly loss since January, 2011, when the market had lost a little over Rs 7,00,000 crore.

FIIs were bullish on the debt market and made an investment of Rs 2,931 crore during the period under review, while pulling out Rs 10,831 crore from the equity market, Sebi noted.

So far this year, FIIs have pumped Rs 19,531 crore into the stock and bond markets, compared to about Rs 1,79,674 crore in the whole of 2010.

The number of FIIs registered with Sebi stood at 1,735 as of August this year.