The Hindu Business Line : Gearing for competition

The RBI has adopted a roadmap in respect of foreign banks that envisages a greater role for them in the economy. The years after 2009 will see increased activity by foreign financial intermediaries in India. Indian financial intermediaries must adopt suitable strategies and ready themselves to face the competition.

In India we have been observing great volatility in the Sensex the last few months. Repeated corrections and ups and downs are because of increased integration of the domestic and global financial sectors.

For example, changes in interest rates in the US or the UK, or even signals to that effect, cause fluctuations in share prices in other countries. This is because of the decisive of FIIs as buyers and sellers in stock markets across the world. The FIIs, who have invested about $4 billion in Indian equities, can continue to cause ups and downs, sometimes to the disadvantage of Indian investors.

The Indian economy, now in fast-growth mode, has to adopt a suitable strategy in line with global developments. While the equity market is a good performer, it is still small compared to those of developed countries. But volatility must be reduced.

The solution lies in scaling up investments by domestic investors and Indian mutual funds. They must become more active and even aggressive. New investors must be encouraged. Depositories and SEBI must play greater role in this regard.

K. K. Ammannaya

Udupi

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