The massive flow of investments from foreign institutional investors (FIIs) in recent weeks are more globally linked than locally driven, feels BNP Paribas Securities India.
"Huge FII investments ($16.2 billion till early October and $3.6 billion in September alone) have driven Indian equities' outperformance. However, a comparison of FII flows into India with that into rest of Asia shows the recent massive flows are a result of global liquidity injection, and not so much a consequence of the government's new found enthusiasm for reforms," Manishi Raychaudhuri, head of research at BNP Paribas Securities India, said.
Under the new finance minister P Chidambaram the government has unleashed a barrage of reforms since September, 2012 to rebuild investors' confidence and accelerate the slowing economic growth.
Raychaudhuri said while the reform measures may not have led to the increase in FII investment flows, investors are also keeping a watch on announcements made by the government and their implementation.
"Risk of rollback of the recently announced measures has clearly declined, with the government standing firm even in the face of strong political opposition. Going forward, implementation of Kelkar Committee recommendations on fiscal consolidation, Deepak Parekh Committee recommendations on infrastructure financing, and direct cash transfer for subsidies, and expediting clearances for stalled infrastructure projects are some of the measures that could be implemented," he said.
