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FIIs still see long-term value in Indian equities

business Updated: Aug 08, 2013 01:39 IST
Manik Malakar

Foreign institutional investors are still investing large sums in Indian equities despite the prolonged economic slowdown and the falling rupee.

The headlines have been alarming – FIIs have pulled out about $5 billion (about Rs 30,000 crore) from Indian equities so far this year.

But a careful reading of the fine print tells a less scary story – net FII inflows in Indian equities so far this calendar year is $7.5 billion (about Rs 45,000 crore), about 20% less than the figure for the year-ago period.

FIIs have pulled out large amounts from Indian debt instruments but interest in equities remains healthy.

“None of the other emerging markets are doing well. So, we stand out in relative terms,” Bhavtosh Vajpayee, MD, India Equities, Barclays, told a television channel recently. So, India is expected to continue to receive a chunk of FIIs’ allocation to emerging markets as the long-term growth prospects remain good.

“FII interest in India is continuing,” said Suresh V Swamy, executive director, PwC India, pointing to the net inflow figures in January-July 2013 as well the increase in the number of FIIs registered with the Securities and Exchange Board of India.

And even if the US economy recovers, funds from the still stressed euro zone will continue to flow to India, experts said.

“India is going through a tough phase on various fronts,” added Mayuresh Joshi, VP, Angel Broking, pointing to the slowing economy and to fears over political uncertainties leading up to and after the next Lok Sabha elections due next year.

“Over the last few months, the government has taken several reforms measures,” said Ajay Bodke, head, investment strategy, Prabhudas Lilladher.

“I am positive on India in the long term, though there may be some short term headwinds,” said Sankar Krishnan, MD, Alvarez & Marsal India, a global service firm.