Mumbai, Jan 14: The progress of the public sector disinvestment process would decide the future course of foreign institutional investors' (FIIs) investment decisions in India, feels chiefs of foreign brokerage houses and FIIs. Jardine Fleming India Asset Management chief investment officer and director UR Bhat said, "There will be no dramatic change (in the investment perception on India) unless privatisation and disinvestment picks up."However, India is far removed from the risks of capital outflows. According to the investment strategy report "India: Strategy 2001", released by HSBC Securities and Capital Markets (India) Ltd, in the year 2000, when the stock market (BSE Sensex) declined by 21 per cent, India experienced a net FII inflow of $1.5 billion. FIIs inflows for the year 2000 were marginally lower at Rs 6,459.4 crore.
As per the report, the risk of capital outflows is low since India forms a small percentage of total inflows into Asia. Besides, the risk of huge outflows from Asia is low as US portfolio investments into Asia post crisis have remained weak with Latin America having turned a larger recipient.
Developed nations had also been vary of undertaking further Asian exposure before the restructuring is completed.
FIIs would tend to overlook the negative aspects this year if there is some progress on disinvestment, says a senior official at another FII. According to the report, only kickstarting private sector participation in infrastructure among other bold reforms can raise the market upside.
The announcements in the budget and change in the economic policy would also indicate which way the markets would move. Ask-Raymond James & Associates Ltd executive director Anand Tandon said, "The negative impact of Morgan Stanley Composite Index's (MSCI) proposed change in methodology to a free float system would be addressed if in the coming budget FIIs are allowed to invest more than 40 per cent in the company." The initial view on emerging markets should be positive and hence India would gain feels some FIIs.
"There will be good inflows on the back of the US interest rate cut," said Mr Tandon. According to a HSBC report, the market is trading at its lower band of valuation. HSBC Securities and Capital Markets(India) director and head of research Vasudeo Joshi said, "The market would be in the trading zone of 3850-4850." As per the report, likely decline in IT services export growth is more or less factored into stock valuation. Barring exports, the Indian economy growth would largely remain unaffected by the eminent US slowdown, the report said.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
