Net capital flows are expected to witness a decline in the last quarter of 2010-11, the Centre for Monitoring Indian Economy (CMIE) has said in its monthly review.

“We expect foreign investments, particularly portfolio investments, to weaken in the March 2011 quarter. We expect portfolio investments to dip from an estimated $12.3 billion in the December 2010 quarter to $5.3 billion in the March 2011 quarter,” the CMIE said.

Net capital flows had shot up to $20.5 billion in the September 2010 quarter on the back of strong inflows in the portfolio investments account.

They are expected to have remained strong in the December 2010 quarter too, on the back of healthy fund flows from foreign institutional investors.

According to SEBI data, FIIs pulled out over $2.2 billion from the equity markets in January and February.

FII flows are expected to have remained tepid during the March 2011 quarter on account of international geopolitical tensions, as well as weak domestic equity markets.

The rising prices and interest rates may have also spooked foreign institutional investors, the CMIE said.

Foreign direct investment is, however, expected to continue to grow at a healthy pace.

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