Foreign investors are pulling money out of India's state-controlled metals and mining firms

Foreign investors are divesting from India’s state-controlled enterprises taking their holdings to a three-year low as the country increasingly utilize these entities to stimulate the economy through below market pricing and other interventions.

India's economy is growing at its slowest pace in nine years and investor confidence has also been eroded by the current government's frequent policy u-turns, corruption scandals like the one that shut down iron ore exports in the most productive state and power blackouts.

Foreign-based hedge funds and institutional investors have cut their stakes in iron ore miner NMDC, Steel Authority of India and Coal India reports Bloomberg.

One large European investor, The Children’s Investment Fund, is even going as far as suing the Indian government and Coal India:

“We regard the failure of directors to raise coal prices, despite substantial increases in wage bill of 65 billion rupees this year, to anything like market rates a total failure to fulfill their duties properly,” Oscar Veldhuijzen, a partner at The Children’s Investment Fund, wrote in a letter dated Aug. 1 to Coal India Chairman S. Narsing Rao.

Lakshmi Mittal, in charge of the world's largest steel company ArcelorMittal, appears to share the negative sentiments.

In July, Mittal said he has no immediate plans to invest in his home country India: "India remains a priority but not for investment. I'm not locating capital to India or China as I don't see things progressing there. We can't remain stuck, so we move on."