'US debt crisis to benefit Indian market'

The US debt crisis triggering deep cuts in the stock markets across the globe is likely to benefit India in due course, said a senior official associated with the market regulator Securities and Exchange Board of India (Sebi).

“The downward movement in the Indian market is a very short-term knee-jerk reaction,” the official said, adding once the situation stabilised, Indian markets would be very lucrative for FIIs.

“With the US credit rating getting downgraded by the Standard & Poor’s and most of the markets falling more than India, FIIs are set to move here as, at worst, the growth rate in the current financial year would be 7.5 per cent.”

Under pressure from the fears of a double-dip recession in the US and financial problems in Europe, stock markets worldwide including that of India, witnessed a substantial fall last week.

There is an apprehension of the situation worsening further on Monday with credit rating agency Standard & Poor on Saturday lowering the US credit rating from AAA to AA.

The official said in the immediate run, FIIs might sell in the Indian markets but while taking fresh positions, they will find the markets very attractively placed “Markets like India, which are well-regulated with good economic growth prospects and large number of companies, will certainly be preferred by the FIIs.”

The official said as far as retail investors were concerned, they would take time to come back to the markets. Sebi had recently announced a number of steps to bring back small investors to the stock markets.

As the markets are being driven by global cues, it is expected that the measures announced by the regulator to simplify processes would be beneficial in broadening the market base in the medium- and long-term, said the official.

The proposal to bring in Uniform KYC (know your customer) norms will have a major bearing in this regard, along with the steps announced to support mutual fund distribution and simplification of the IPO process, he said.

The simplification of Forms associated with investment in the financial market is also likely to help investors.