India likely to witness increased capital inflows: Pranab

The present financial crisis in the US and the Euro zone could encourage increased investments by foreign institutional investors like pension funds and other long-term investors in Indian stocks, helping to reduce the impact of a global stock market rout.

With its growth momentum intact and economic fundamentals strong, India is well positioned to capture this flow, finance minister Pranab Mukherjee said.

Reviewing the current economic situation with Reserve Bank governor D Subbarao and chairman of the prime minister's economic advisory council C Rangarajan, the finance minister, however, said the slow economic growth in the US and debt worries in the Euro zone have resulted in sharp falls in the US and European markets. This has affected stocks of Indian companies that have a global presence, he said.

However, in comparison to the sharp fall in the indices in US and Europe yesterday, the Indian indices have weathered any contagion effect, he pointed out.

The stock markets in India today contracted by 1.9 per cent against a near-6 per cent fall in the US and European markets. Other major Asian markets also saw losses of 4 to 6 per cent.

Mukherjee said while the market sentiments in the US and Europe has a bearing on Indian markets as well in the short-term, India is better positioned than most other nations, including the advanced economies, to meet its problems.

India has already been upgraded to market weight by some global investment banks from underweight, he said, adding that it was a testimony to the strength of the Indian economy.

The present challenge is one, which would in the long run give India greater opportunities for growth, he said. He also expressed confidence in India's ability to emerge stronger from the present situation.