Stating that the country would "emerge as a relative value given the higher GDP growth" here, BofA-ML in a report today said, "Portfolio flows could resume in equities due to risk diversification out of China's volatile equity markets and in bonds following the junking of Brazil by S&P, provided the RBI hikes the G-Sec limits for foreign funds."
The US central bank is widely expected to hike its historically low interest rates either at its next week meeting or in December.
Following the Chinese crisis, there have been views that Fed chairperson Janet Yellen may push back repo rate hike to December.
The report also said the "best case scenario for India is a 0.25 per cent Fed rate hike. While there could be a kneejerk sell off across EMs, India would likely emerge as relative value, given relatively higher growth."
But the report warned that the worst is if the Fed delays action to October or December as more the delay higher will be volatility which will lead the foreign funds to keep of emerging markets, including India.