'FIIs pose no threat to capital market stability'

By Our Corporate Reporter

CHENNAI, FEB. 10. The entry of foreign institutional investors has helped improve Indian stock markets tremendously and even if they pull out all their investments overnight the markets will not be affected, according to Mr. Shankar Sharma, Director, First Global.

Speaking on ``FIIs impact on the capital market'' at a meeting organised by the Tamilnadu Investors Association here on Friday, he said foreign institutional investors usually invested heavily in Indian markets in January-March of every year. Emerging markets accounted for six per cent of their investments. The net investment in Indian markets since January this year is around Rs. 4,500 crores.

However, the correlation of FII investments with the index movement was very little, Mr. Sharma said. ``Our market is too big and will move on its own fundamentals irrespective of the entry or exit of FIIs, he said.

On the advantages of FII entry, he said it has forced the managements of Indian companies to make their balance sheets more transparent. Indian investors were now able to access information like anybody else abroad, he said. ``Companies are willing to share information which did not happen 10 years ago,'' he said.

The Indian market was one among the emerging markets and the most transparent in the world, he said. Even when countries such as Mexico, Brazil, Argentina, Thailand and Indonesia went bankrupt the Indian market remained steady. It was a diverse market and offered some kind of return on a relative basis, he said.

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