FII outflows an area of concern: Pranab

Expressing concern over the rapid pullout of FII money, Finance Minister Pranab Mukherjee today said outflows driven mainly by the euro zone crisis are impacting the stock market.

"The current volatility in the stock market and withdrawal of FIIs have a direct correlation with the euro zone crisis, so it will have some impact, particularly on FII flows," Mukherjee said while addressing the Hindustan Times Leadership Summit.

The minister, however, took some comfort from the increase in foreign direct investment (FDI) so far this year.

"Up to now, the indication is that FDI inflow is much better compared to last year, but FII outflow is an area of concern," Mukherjee said.

Foreign funds withdrew over Rs 3,200 crore from the Indian securities market in the month of November amid concerns over the worsening debt crisis in the euro zone.

Stock markets have witnessed sharp volatility in recent times, mainly on account of the withdrawal of funds by foreign institutional investors (FII) and depreciation of the rupee.

The BSE benchmark Sensex index has lost over 19% so far this year and is down by nearly 22% from an all-time high of 21,206.77 points scaled on January 10, 2008.

With respect to foreign direct investment inflows, during the April-September period, FDI went up by about 74% to $19.13 billion from $11 billion in the year-ago period as inflows were robust in the initial months of the fiscal.

He said there is a renewed purpose among nations in coming together to address global issues. The euro zone is presently grappling with a sovereign debt crisis, which could have implications for the growth prospects of both developing and developed economies.

Mukherjee said, "If India can continue to grow and acquire economic stake, we would be a source of stability for the world economy that provides safe havens for restless global capital. That would also enable us to grow faster."