FII inflows expected to be stronger in H2 FY 13 at USD 11.2 billion

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FII inflows are expected to get stronger in the second half of this fiscal (2012-13) at USD 11.2 billion on account of leading FIIs started looking at India as a good long-term investment destination, Centre for Monitoring Indian Economy (CMIE) said in its monthly review.

"FII inflows are expected to get stronger in H2FY13 at USD 11.2 billion as large FIIs like JP Morgan, Morgan Stanley and Deutsche Bank have started looking at India as a good long-term investment destination," CMIE said.

The unveiling of a fresh package by the European Central Bank in September 2012 for easing the European debt crisis is also expected to help reduce global risk aversion.

"We expect net FII inflow in FY 13 to be around USD 14.7 billion," the economic think-tank said. The FDI inflows during the year are also expected to remain healthy at USD 20.8 billion.

CMIE expect the situation to improve going forward. Current account deficit is expected to reduce a bit in the remaining quarters of 2012-13 and capital inflows are expected to pick up. A major improvement is expected to be seen in FII inflows.

"We expect India to see net FII inflows of USD 5.4 billion in the June 2012 quarter. As per the Sebi data, FIIs have already invested USD 4.4 billion into India during July-August 2012," CMIE said.

The reduction in global risk aversion following the announcement of new measures by the ECB, near zero interest rate regime in the west and high interest rates prevailing in India are expected to lead to an increase in external commercial borrowings to USD 11.4 billion in FY 13 from USD 10.3 billion in FY 12.

We expect the net inflows of NRI deposits to increase further to USD 12.4 billion from an all-time high of USD 11.9 billion in FY12.

With zero interest rates prevailing in the US and Europe, Indians abroad are expected to invest more aggressively in NRI deposits, it said.