Sebi sees no FII inflow reversal as long as growth continues

Amid diverse views expressed by the Finance Ministry and the Reserve Bank of India (RBI) on curbing FII infolws, market regulator the Securities and Exchange Board of India (Sebi) today exuded confidence that there would not be any reversal of foreign fund flows into equity markets as long as Indian economy is on a strong wicket.

Foreign institutional investors have pumped in a record $21 billion (Rs 96,000 crore) so far this year.

"As long as the India is on a growth path, I don't think we should think of certain reversal. Certainly, there will be a slowdown because there will not be all years in which we will see massive inflows, but that is something as the system grows, it learns to deal with these things," Sebi Chairman C B Bhave told UTV Bloomberg news channel in an interview.

Bhave's comments came on the heels of Finance Minister Pranab Mukherjee ruling out curbing FII inflows as of now.

However, RBI Deputy Governor Subir Gokarn said the central bank could intervene in forex markets if capital surge leads to any disruptions.

"Our view is that when we see signs of disruptions caused by (excessive) capital inflows and impact on domestic market exchange rate, that's the basis to respond," Gokarn, whose remit is monetary policy, had said.

Bhave further said that except for the year 2008, in which there was global financial crisis, "we have not had a single negative year ever since the FII policy was introduced because India has been on the growth path."

Betting high on the Indian equity markets, foreign institutional investors (FIIs) have infused 21 billion dollars this year so far, the highest ever in a year.

While most countries are struggling to recover, Indian economy has recorded 8.8 per cent growth in the first quarter of this fiscal. In fact, IMF has upscaled its growth projection for India to 9.7 per cent in 2010 from 9.4 per cent estimated earlier.

IMF uses slightly different method of GDP estimation from India.

The government has projected the economy to grow between 8.5 and 8.75 per cent this fiscal.