Anand Rathi pins hopes on domestic capital flows

The Sensex may be driven by some degree of speculation around it, but it was no longer dependent on the foreign inflows.

The Indian equity market was now better placed to deal with setbacks even if foreign investors slowed down as household savings were steadily flowing into the market and participation of indigenous capital was rising, said investment guru Anand Rathi, chairman of Anand Rathi Group.

"Today contribution of the household savings in the equity market is around 6 percent and it is likely to increase to 7-8 percent in the next 3 years. Likewise FIIs contribute around only 20 percent of the total business in the market and with the rising local participation backed by the increasing savings of the general people, the effect of the external shocks would be minimal," he said.

A fall in inflow of foreign capital or some degree of withdrawal from the market due to some external circumstances could be absorbed by the market, he reiterated.

Commenting on Calcutta Stock Exchange, Rathi, a former president of Bombay Stock Exchange (BSE) said demutualisation coupled with roll-out of the BSE trading platform would help CSE do well.

However, he said the proposed SME trading platform on CSE could face problems.

"It all boils down to the liquidity performance""particularly when we analyse the performance of the F&O trading, which has not yet picked up because of the low liquidity," he explained.

Rathi said the rupee appreciation reflected health of the economy and the strong currency mirrored higher purchasing power.

"Import prices have come down and this has helped in control of inflation," he explained.

He said Indian entrepreneurs could manage market dynamics, become more efficient and come out with better solutions to business risks.