Pitted against the double-whammy of falling rupee and plunging share prices, foreign investors are

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estimated to have taken a hit of over Rs two lakh crore in 2011 on their investments in Indian stock markets.

Once a darling of overseas investors for its impressive returns, the Indian equity market turned into a money-guzzler for institutions from abroad in 2011, and the outlook does not seem bright for the new year as well.

It is not the amount of the net outflow by FIIs (foreign institutional investors) alone, which makes 2011 a bad year for Indian stock markets.

The quantum of losses suffered by FIIs were also large and the depreciation in their investment value was also much larger than that for the domestic investors, owing to a plunge in the rupee valuation against the US dollar and other foreign currencies.

According to market regulator Securities and Exchange Board of India (SEBI), FIIs purchased stocks worth more than Rs 6 lakh crore during 2011, but sold shares worth a higher amount -- resulting into a net outflow of over Rs 2,700 crore for the year.

In comparison, Indian equities had witnessed a net FII inflow of over Rs 1.3 lakh crore in the previous year, 2010.

Also, FIIs took a hit of 36 per cent on their investments during 2011, as measured by the movement in the BSE's Dollex inidex (which tracks the barometer index Sensex in the US dollar terms for foreign investors).

Taking into account a gross purchase of shares worth Rs 6.11 lakh crore by FIIs in 2011, the total hit for them is estimated at over Rs two lakh crore. They accounted for about 10 per cent of total losses of Rs 19.45 lakh crore for the entire stock market.

The capital poured in by the FIIs has often been called 'hot money' because of its unpredictability, but these overseas entities have still been among the most important drivers of Indian stock markets.

During 2011, the FIIs were seen shifting their loyalty to the debt market and infused Rs 42,067 crore. This helped India get a net FII inflow of Rs 39,353 crore for the year, while taking into account both stocks and debt securities.

Fears of a global economic slowdown and domestic troubles with inflation, interest rates, lack of reforms and the falling rupee all collaborated to make the foreign investors cautious in 2011, the experts said.

Destimoney Securities' Managing Director and CEO Sudip Bandyopadhyay said, "Euro zone worries have pushed the Indian market into risk aversion mode and other emerging countries are performing better than India, so FIIs are staying from our market."