Inflows near $8 billion this year, set to gain momentum.
Hurricane Katrina has been a blessing in disguise for the Indian stock market. Porfolio flows to the country are set to rise as the US Federal Reserve keeps interest rates low to contain the fallout of the disaster.
Says Vikas Khemani, senior vice-president of Edelweiss Capital Ltd, "The requirement of $150 billion for rehabilitating people in the affected areas is likely to slowdown the economic growth in the US during the current year. This will lead to more US money flowing into emerging economies."
Shankar Sharma, director of First Global, has also shrugged off fears that the hurricane will impact FII inflows. "These event-based issues will not have a long-term impact on the markets. These will be forgotten in a couple of months," he says.
FII investments during the year have already touched the $7.96 billion mark (Rs 34,752 crore/Rs 347.52 billion) with September's share alone being $435 million (Rs 1,898 crore/Rs18.98 billion).
The other reason for the optimism on the FII front is that India does not have to depend on US-based institutions alone. Devesh Kumar, head-equities of ICICI Securities, says, "Even if the investment flows from the US slow down, it is unlikely to affect the overall FII inflows. In July 2005, Japanese institutions invested almost half of the total FII inflow of about $2 billion. Unlike in the past, the sources of FII inflows are broadbased now."
Jaiprakash Sinha, assistant vice-president (research) of Kotak Securities, says FIIs are not looking for big profits any more. They are looking at single-digit returns of 7 to 9 per cent. So even if the price-earnings multiples are going up, they are ready to invest at higher valuations.
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