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Shailesh Menon

Strong market, corporate showing neutralises the expensive tag

Mumbai , Oct. 14

Despite being a "bit pricey", foreign institutional investors are finding Indian markets, a better destination to park their money.

Strong market runs and good corporate performance seem to have helped Indian markets to shrug off the tag of being overvalued, bloated and unviable.

FII registrations in the country have gone up significantly over the years. There were 353 registered FIIs in March 1996 and by December 2005, it had touched 823. In October 2006, the number had climbed to 972.

FII inflows between 1999 and 2002 stood at about $1,829 million. This has gone up considerably between 2003 and 2005 to $9,599 million.

"India is a very good investment destination. It is a bit pricey when compared to other Asian markets, but growth is much faster here. Strong market performance, large market capitalisation and satisfactory GDP growth rate neutralises the expensive tag," said Mr Andrew Holland, Head - Strategic Risk Group, DSP Merrill Lynch.

SENSEX ALL THE WAY

A peep into the growth of the Indian capital markets offered by a recent Reuters Asian Markets Report indicates that the BSE Sensex has grown around 35 per cent over the past 10 months. The bellwether index climbed 3338.49 points (from December 30, 2005, close of 9397.93) to end at an all-time high of 12,736.42 on Friday. This performance puts Sensex on the third spot among Asian markets.

"In terms of growth percentage of Asian stock markets, the report has named Vietnam and China as the leaders.

"This is not holistically true because Vietnam is a very small market with some 50-odd stocks and a market capitalisation of about $3 billion. China is big; but it has too many negatives in stringent regulatory norms and FII entry is largely restricted," said Mr Alex K. Mathews, Head (Research), Geojit Financial Services.

The report logs a negative year-to-day (December 30, 2005 to October 13, 2006) growth for Thailand (-0.3 per cent) and South Korean (-2.3) markets.

According to analysts, FIIs are selling in these two markets and buying in India.

The two markets had registered a year-on-year (December 31, 2004 - December 30, 2005) growth percentage of 6.8 per cent and 54 per cent, respectively.

"Unlike other Asian markets, India, being large and liquid, is very good for investment. It is equally good for FDI as well.

"FII inflows will continue for many years to come," said Mr Alok Vajpeyi, Vice-Chairman and MD, Dawnay Day AV Financial Services.

Related Stories:
We will continue to attract FIIs: Chidambaram
`Flows to emerging markets have stabilised'
FIIs stay rooted

More Stories on : Foreign Institutional Investors | Stock Markets

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