The Hindu Business Line : “US crisis may dampen FII investment in equities”

NEW DELHI: The US financial crisis, which has sent tremors around the world, is likely to slow down FII investment in India's equity markets, even as debt segment could witness positive response from a section of such investors, a top finance ministry ai de said today.

So far as FDI is concerned, it would depend on fundamentals of the economy which have not altered after the US financial turmoil, Chief Economic Advisor (CEA), Mr Arvind Virmani said here.

Mr Virmani expected around nine per cent growth of the economy over the next four years and said that despite global uncertainty, there is a solid basis for the growth of Indian corporates, given their strong base.

“To the extent that Indian companies, whether for the global operations or for their domestic operations, were depending on equity flows, those clearly would be affected in the rest of this year, at least for the next three months,” he said.

Elaborating, he said the US Federal Reserve has increased the liquidity to meet the crisis, but even after that demand for money has gone up because of the turmoil.

“So risk adjusted rate was even higher. It had gone back a little before this stage of the crisis, but it went up again,” Mr Virmani said. So obviously the cost of global funds and flow of global funds would be affected.

“So that effect is there,” he said. However, when it comes to the debt market, the effect would depend on the perception of investors, the Chief Economic Advisor said. - PTI

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