Foreign institutional investors pulled out heavily on Thursday after a freshly leaked US diplomatic cable revealed on Thursday suggested that UPA-I offered bribes to win a crucial confidence vote in Parliament on the US-India nuclear deal in 2008.

According to exchange data, FIIs have (net) offloaded Rs 1,128.61-crore worth shares from Indian markets. While they bought Rs 1,546.32-crore worth shares, overseas investors sold Rs 2,674.93-crore worth of equities.

The secret US State Department cable obtained by WikiLeaks and published by The Hindu on Thursday details a conversation between a senior Congress party member and a US Embassy official regarding payment of almost $9 million by a government facing a crucial confidence vote to members of a regional political party to secure their support.

Thanks to the neutral Union Budget, FIIs have turned optimistic in March, buying about Rs 2,230-crore worth equities after remaining on the sell side in February and January. They were net sellers of Rs 7,169 crore in 2011 so far, according to SEBI Web site.

According to analysts, the market had just started to recover from scams involving 2G spectrum auction, the Adharsh Housing Society and Commonwealth Games. “With the new revelations, we could see further selling from FIIs,” said an analyst working with domestic broking firm.

KPMG recently conducted a survey with certain leading Indian corporates to understand their perception of how corruption is corroding the economy and the corporate environment. Not surprisingly, the results have highlighted that corruption has a significant impact on economy and businesses.

Commenting on the findings of the survey, Mr Deepankar Sanwalka, Head-Risk and Compliance Group, KPMG India, said, “We realised that there was an uneasy sentiment among the corporates in India about the recent developments. Through this survey we have tried to find the concerns, apprehensions and the challenges faced by different sectors and have also laid stress on various steps that have to be taken immediately to restore confidence in the Indian economy. This survey is crucial as the global business fraternity is closely watching what is happening in India.”

Scams have shaken the confidence of foreign investors, said Mr Arun Kejriwal of KRIS Securities. “Besides scams, Japanese investments are in the process of moving out of India, to strengthen their domestic infrastructure,” he added.

The KPMG survey said: “The corporate sector has also demanded a structured and effective whistle-blowing mechanism to report potential bribery or corruption issues; thereby, ensuring more scams come under the public purview, while assuring complete security to the whistleblower. There is also a realisation of the importance of implementing new steps within the organisation to tackle and prevent promotion of bribery and corruption. Industry bodies have also been advised to take the lead in standing up against bribery and corruption in their respective sectors to ensure a corruption free environment.”

Analysts also said that the hike in repo and reverse repo rates by RBI on Thursday could also have scared FIIs, given the contracting margin of companies in a rising interest rate scenario.

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