'FIIs to stay away from India till next year'

Foreign Institutional Investors (FIIs), who have started selling their stocks in India sharply after the collapse of Lehman Brothers in September, will continue to stay away in 2009, with some recovery expected only next year, say global analytical firms.

"FIIs will likely remain weak for the whole of 2009. A rebound may be seen next year when international investors regain confidence," Moody's economy.Com economist Sherman Chan told PTI, adding that India will most likely start to recover in the last quarter of the next fiscal.

Echoing this view, Fitch Sovereign Ratings Asia Pacific head James McCormack said, "Our expectation is that the global economy will begin to recover in 2010, and at that time India will begin to recover as well."

To a query on when the return of FIIs into India was expected, he said, "We do not anticipate meaningful returns of capital flows to emerging markets until the middle of 2010 (calendar), at the earliest."

However, Crisil Principal Economist D K Joshi is more optimistic and expects FII recovery in the second half of the next fiscal as there would be some improvement in the global scenario by then, providing impetus to the Indian economy.

Net FII outflows from the equity market in India stood at around $8,333 million since September.

During the period, there was net inflows of $433.50 million only in the month of December in the equity market. In other months, there has been net outflows by FIIs.

Outflows of funds by FIIs have led to sharp fall in benchmark equity index Sensex since Lehman Brothers applied for bankruptcy in the middle of September. Besides, global gloomy economic conditions have also affected the FII inflows.

The Sensex has nosedived by 5,675 points since then to close at 8,325 points on Friday.