MF chiefs allay fears over high FII inflows, bullish on infra

"Why are you worried about the scenario of selling by FIIs? Let the foreigners sell so that we can buy our own stocks cheap," Reliance Mutual Fund's Head of Equity Investments, Sunil Singhania, said at an event here.

Both Singhania and Sanjay Sinha, Chief Executive Officer of L&T Mutual Fund, opined that market-prospects were bright both in the medium-and-long-term and that a pull-out by FIIs, if at all, would only result in a short term volatility.

An 18-month rally has seen the BSE Sensex gaining over 150 per cent, rising from 8,000 points to reach the 20,000 mark this month. Unlike the pre-slowdown rally, domestic institutions and retail investors have not participated in the surge, primarily driven by heavy FII buying.

The inflows have resulted in a steady appreciation in the Rupee, giving rise to concerns over the price competitiveness of the country's exports which, in turn, has led the Reserve Bank to announce that it may intervene in the forex market.

The rally has also jacked-up the valuations of Indian assets but Sethuram Aiyer, Chief Investment Officer of Shinsei Asset Management, said they are not high "if we factor in the growth potential."

"Currently, everybody is raising concerns over the PE multiples to be in the region of 24. But if you take into account the 20-30 per cent growth by a company for two-years, you get to a PE of 15 in March 2012 which is very reasonable," he said.

He, however, flagged fiscal and current account deficits and high inflation as areas of concern on which concrete action is needed. Going forward, infrastructure sector stocks will perform well, Sinha said.

"We are approaching the end of the eleventh Five Year Plan due to which spending will go up by Government agencies while the next plan has also allocated a high amount towards infra building," Sinha said.