As the Indian economy is showing signs of recovery, foreign institutional investors are expected to pump in more funds into equities, which may take their total exposure in the country to as high as USD 35 billion this fiscal, say experts.
"If all goes well and GDP continues to grow at the current levels, we could expect FII flows into the equities to touch USD 25 billion within the next one year," DSP Black Rock MF president and chief investment officer S Naganath told PTI on the sidelines of a Ficci-organised capital markets summit here today.
After growing at under 5 % for two consecutive fiscals, the economy grew at 5.7 % in the first quarter of 2014-15. While the government has projected a near 6 % growth for the full fiscal, the Reserve Bank has pegged it at 5.5 %. "FIIs have already pumped in USD 14 billion into the domestic equities so far this fiscal and it is all set to increase next year," Naganath said, adding that they will be focusing on the defensive sectors and gradually to mid-segments.
However, India Ratings' managing director and chief executive Atul Joshi sees the overall FII inflows topping USD 35 billion this fiscal. "We do hope that this trend will continue and FII inflows may cross the mark of USD 35 billion or more by the end of the fiscal," he said.
"Typically, foreign inflows will happen in defensive sectors like banking, IT and pharma. The way the country moves and its GDP moves, different sectors become attractive accordingly. Mid-segment sectors like cement, steel, textile, auto and even real estate may also see the inflow of foreign capital in days to come," Joshi said.
After pulling out nearly USD 15 billion from the country last fiscal following the US Federal Reserve's talk of tapering its stimulus programme, which hit the rupee hard, FIIs have returned to the market in a big way. The stock market rally following the BJP victory in the general elections since May has catapulted the BSE 30-stock index, Sensex, by close to 29 %, year-on-year.
The total exposure of FIIs in the domestic market is USD 25 billion, with USD 11 billion in the government bonds.
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