RBI to intervene if FIIs inflows are lumpy: Governor Subbarao

RBI-FII

Kamal Kishore Shankar & Charanjit Singh
Chandigarh, Oct 15 (PTI) Keeping a watch on the record
USD 22 billion FII investments in the booming Indian stock
markets this year, the Reserve Bank of India, the country's
apex bank, on Friday said it will "intervene if the inflows
are lumpy and volatile".
"We are watching the situation and our policy is clear.
We will intervene if (FII) inflows are lumpy and volatile or
they disrupt macro economic conditions," Reserve Bank Governor
D Subbarao said after a meeting of central bank board here.
The cross-country foreign institutional investors (FII)
have pumped in the highest ever USD 22 billion so far during
2010 calendar.
On October 13, FII investment crossed the magical USD 22
billion or Rs 1 lakh crore in stock markets. The total inflows
last year was USD 17 billion.
On robust foreign fund inflow, the rupee rose to touch a
25-month high of about 44 against the US dollar on Friday,
giving
anxious moments to policy makers and exporters.
According to reports, the RBI had intervened on Thursday
by buying dollars in the foreign exchange markets to arrest
the rise in value of rupee.
The sharp rise in FII flows to Indian stocks has pushed
up the benchmark Sensex, which re-gained the psychologically
important 20,000 mark in September, after a gap of 32-months.
Subbarao's comments follow Indian Finance Minister
Pranab Mukherjee's remarks in an interview to a private
television channel ruling out curbing FII inflows.
State Bank of India Chairman O P Bhatt said in Mumbai
that capital inflows would remain high for some time. But the
market would be in a position to absorb them for the next 2-3
months.
"There are things like the disinvestment programme,
the Coal India IPO due to which the money will keep coming.
The market will absorb for 2-3-months but I do not know what
will happen after that," he said.
According to Ajay Sahai, Director General of export body
FIEO, the FIIs could be dissuaded to bring in the money by
putting a six-month cap on repatriation of their funds.
"They (FIIs) should only be allowed to repatriate their
investments after six months," he said.
After touching a monthly growth of about 36 per cent in
April this fiscal, the export expansion slowed to 22.5 per
cent in August reflecting uncertain recovery in the western
markets.
The concerns on higher FII inflows have been heightened
by the forthcoming mega IPO of Coal India Ltd, which is
expected to garner about Rs 15,000 crore (about USD 3.5
billion) with the involvement of FIIs.
"Situation which we are sensitive to, it (Coal India
IPO) may put some pressure at least temporally," RBI Deputy
Governor Subir Gokarn said. He was also here to participate in
the board meeting. PTI KKS
AVT


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