Finmin's Worry Line Increases In Sync With Market Indices

NEW DELHI: Record high foreign fund inflows into the stock market is a matter of concern for the government, a finance ministry official said on Tuesday even as the Bombay Stock Exchange benchmark index closed above 19,000 points for the second consecutive day.

Surging foreign fund inflows worry the government as a rapidly-appreciating rupee could slow down exports and hurt the economy. The government has already scaled down its export target last week.

“Inflows are high as foreign institutional investors find Indian shares attractive. It is also because of the interest rate differential,” a finance ministry official, who declined to be named, told reporters here.

However, he said the rise in Sensex was not a cause for concern. Finance minister P Chidambaram said last week that the steep rise in market indices surprised and worried him. He said the rupee is not in a comfort zone at the moment and ways must be found to keep a competitive exchange rate.


The Bombay Stock Exchange’s 30-share index Sensex closed almost flat at 19,052, seven points below its previous close. Foreign funds had bought equities for $957 million on Monday, taking the total inflow this month to $4.6 billion.

The government’s worries are likely to get reflected in the monetary policy revision later this month with experts expecting a raise in the reserve requirements of banks aimed at mopping up the excess liquidity in the system.

Exchange rate and export competitiveness are in the focus of policy makers now as inflation appears to be under control at well below 4%, indicating that making imports cheaper by a strong rupee is not the need of the hour.