rheinu said:
Hello all,
one of the reason for FII selling is the fear of further hike in interest rates in the US.
A BLOOMBERG survey yesterday shows 56% of the analysts feel another quarter
% hike in rates in June end. So hedge funds are pulling out their funds from emerging markets.
Last week against contionous FII selling Indian MFs bought heavily giving support. Otherwise more crash would have happen.But how long can the MFs keep buying against the Global trend?
Hi rheinu
You are pointing out correctly one of the many reasons for which FIIs sold.
How the interest rates affect us in the long run is to be seen.
If FIIs calculate that emerging market will provide better and relatively risk free growth(political or otherwise) and retun on capital then they will not keep selling.
It only shows our dependence on the Capital inflow from FIIs.
If Market depth increases it will gain more depth and less prone to sudden volatile spasms. Its like this in the middle of deep ocean height of tsunami wave is only few centimeters but as it approaches shallow waters it looses its speed and height of waves increase causing much destruction.
If world economy is affected by economic cataclaysm then only depth of our
market and economic growth will save it. Remember We are second populated country , having all resources and unending supply of talent pool. If ASEAN countries and India + China combine together then it will become world's lagest market place fuelling growth. We can grow in our own right without much dependence on western countries. They are afterall saturated economies. Hence the fear of meltdown for India may not be correct unless
of course we fail to address the inequity and financial/developmental issues.
Yet the power of FII is undisputable and it has been shown many times. The question is Though India is growing, will they kill the golden goose.
Pankaj