Letters: A lifeless stock market

Apropos Akash Prakash's article "Moving towards revulsion" (April 11), there are clear signs of foreign institutional investors (FIIs) rejecting assets, since their faith in the revival of India's growth has been shaken. The Indian equity market is now perceived as lifeless. First, domestic investors viewed investing in the stock market as a risky affair. After the Great Recession, they moved their money in property, gold and other safe assets. However, there is a huge variation in the way returns are estimated by domestic investors and FIIs given the difference in interest rates in India and abroad. Second, unlike the US and Japan that are pumping liquidity into their markets to overcome unemployment and growth, India was considered a good destination. But in the last two years, thanks to the 2G scam, the coal block irregularities and the intent to disallow investments through round-tripping, besides the downside risks to growth on account of the fiscal deficit and inelastic imports in the near term, foreign investors are losing confidence. In such a situation, the market is not in a position to at least hold itself at one level, so that any trigger at any point can take it forward. Even gold and property may not be suitable choices, since investors have to maintain present consumption levels in the face of falling income and the inflationary burden.

R K Arya Faridabad

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