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Fund managers' poll sees dip in FII inflow

Sangita Shah

Many domestic fund managers expect a significant decline in the foreign investment flows into the country.

According to a domestic fund managers survey for May 2002 conducted by Merrill Lynch, a little more than half the fund managers surveyed (57 per cent) believe that this year's FII flows will be higher than in the last year.

Earlier, in April an overwhelming 82 per cent of the fund managers surveyed had expressed optimism over higher FII inflows this year, over last year.

This displays the widespread fear that FIIs may cut down drastically their net investments in the country. The FII net investment in the Indian markets from January 1 to May 28 this year has dropped 72 per cent at Rs 29.434 billion as against Rs 106.891 billion during the same period of 2001.

However, as against the grim outlook, domestic fund flows are expected to improve this month with 64 per cent of fund managers positive on the 13-month ahead fund flow scenario.

As many as 86 per cent of the fund managers said they would go on a buying spree if the markets fell another 10 per cent from the current levels.

The fund managers are bullish on the long-term prospects for the Indian markets. Expectations range between 4,000 and 4,500, with the majority leaning towards the higher side of the target index range.

Interestingly, only 35 per cent of fund managers expect the index fall below 4100. "Fund managers continue to believe the market to be grossly undervalued, with a near 30 per cent thinking the market is undervalued by more than 25 per cent," the Indian arm of the world's largest brokerage said.

Its comments are based on responses from 14 domestic fund managers, overseeing assets of Rs 57 billion ($1.16 billion), to a survey conducted between May 1 and May 20.

DSP Merrill Lynch said the border tension after the Kaluchak incident had forced fund managers to lower their expectations of the index compared with the results of a similar survey a month earlier.

It also warned that the modest percentage of funds held in cash remained a concern. "Given that cash levels still remain at around 3-6 per cent, we believe the downside risk is high."

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