Hedge funds key to further bull run

FII Inflows Part I

 How long will foreign institutional investors (FIIs), which have pumped Rs 23,747 crore, or $5 billion, into the Indian equity and debt markets this year, continue fuelling the boom? The answer is in three parts: valuations, arbitrage, and inflows into emerging market funds.

 The first part of the answer is obvious: FII money will keep coming so long as share valuations appear attractive. U R Bhatt, head of J P Morgan in India, said FIIs were still bullish on Indian stocks.

 With a price-earnings (P/E) multiple of around 17, Indian stocks are undervalued, compared with leading western markets, which trade at P/Es of between 22 and 25.