Is India hostage to FII money?

The market has been receiving FII money at an average rate of a quarter of a billion dollars a day for the last four days. On Monday, which was also the Nifty''s all-time closing high, FIIs bought equities worth $113.3 million. From May 17-22, they have purchased equities worth $747 million. So, is India hostage to FII money? CNBC-TV18 reports

Nobody agrees to this more than Rohit Aggarwal, Managing Director, Ras Capital Management. He says FII flows have been strong in April and May this year which is worrisome. "We know what happens when the flow reverses very quickly in months like May-June last year. For good or bad, India is somewhat hostage to FII flows that play very important part of the market today."

Analysts feel that the FII money plays a very dominant role in Indian markets and there is no reason to believe that these monies would disappear overnight. "I don''t think people want to try and guess where the party is going. They are happy to ride the momentum, while it lasts and they clearly believe liquidity and cheap money, the way it is available, is not going to disappear overnight. So there will be signs and we will get triggers to pull out. On the longer-term, people see India as an outperformer. But I don''t see anybody getting out of India in a big hurry," says Deepak Chhabria, CEO Asia Pacific, IL&FS Investsmart.

However, Dr Jim Walker, Chief Economist at CLSA does not underestimate the domestic demand in India. "While there may be a degree of consolidation in the markets just now or some redemption, I think over the next five years we will see a tremendous story for corporate earnings in India and a continuation of domestic demand profile would be the envy of the world," he explains.