MR Devesh Kumar, Head of Equities, ICICI Securities, believes that FII money will come back into India in January.

FIIs are still bullish on India, he says. He adds that a lot of Japanese money is likely to come into the Indian markets.

Further, he says that a large part of the outflow was prop-book money. Excerpts from CNBC-TV18's exclusive interview with Mr Devesh Kumar:

Your view on the markets now after a 1000-point pull back?

The markets could cross the 9000-barrier and they could also touch 7800 again. However, the undertone is bullish and foreign investors still have a lot of funds that they are still sitting on. They are debating about valuations. As the year-end is approaching, most of them have booked profits and that had led to a correction, but FIIs will come back in January. So the present liquidity will drive the markets in the short-term, but the long-term India story is very bullish. Whenever people get worried about valuations in the leading stocks, they participate in the new paper supply and that is why one is seeing more GDRs, convertible bonds and IPOs. All this is looking robust and there is money to absorb that.

Is it that over the next 2-3 months new money will get directed to the primary market?

My view is that if good quality paper comes in then it will be good for the market. If more money comes into this market and volumes go up, it will definitely be better and that is what will happen in the near term. The Government is missing out on this opportunity, so I hope they also come in and take part in the divestment programme.

In your interaction with foreign investors, did you sense any urgency in terms of what they expect from the Government in regulatory moves?

Our discussions start with policy and related issues but when they end, everybody sounds happy about large private sector entrepreneurships that are available in the Indian market. If one looks at the sectors, which are policy dependent, they have not participated in the rally in a big way and mostly private enterprises are driving the market at this point of time. So if the policy related issues' roadmap is laid out at a faster pace, then I think we will see lot more coming into India.

Is it IT and capital goods that FIIs like as a story or is it others?

They find that in India one has opportunities in a lot of segments such as IT, infrastructure, auto components and domestic local commodities such as cement and consumer goods. In consumer goods, they feel that one has not yet seen the full potential. As retailing and other activities move into the organised sector, there will be newer opportunities opening up in India, which will give good returns to early investors. So they are bullish on India.

Globally, is a lot of new money waiting to come in?

Certainly, every fortnight in Mumbai we meet three-four new investors from newer markets like Europe, from where a lot of money has not come. Similarly, Korea has still not invested much in India and in case of Japanese money, we have seen just the tip of the iceberg been invested here. They are not putting their money for 15-30 days because there could be opportunities in other markets in the region, which they would want to take advantage of. But overall if one talks to foreign investors, they feel that over a longer period the India story will unfold and they will come in at an opportune time. I think a lot of money is waiting to get invested in India and a lot of the prop-books will again come back in January because they don't want to spoil their bonus payouts by putting money in stocks.

Do you think that the billion-dollar pull out was largely prop-bookmoney?

Yes, I think large part of the money was that.

Are you getting a sense that there is a shift of money from other markets, perhaps the Japanese market as well?

My view is that the money will be fresh for India, but it will move from other parts of the world. The Japanese market is giving good returns. So there are opportunities, which will come in the short-term, but I don't think anyone is betting on the Japanese economy over a period of 3-5 years. So when one talks to such people, they are bullish.

But since they are bullish, it doesn't mean that they will put all their money over next six months or 12 months, but it could be over a longer period of time. But one will find a lot of money waiting to flow into this market.

What sectors are you keeping your investors away from now?

Those would be global commodities for sometime, till the trend becomes clearer. Others would include ones where the earnings visibility is not there because of the policy play, so we are asking our investors to be a bit cautious on them.

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