India inflows not to recover for some time

By Nishant Kumar

MUMBAI (Reuters) - India will have to wait until at least the second half of 2009 before foreign funds return on a large scale, with investors waiting for market stability and the outcome of national elections, leading financial market players said on Wednesday.

After rising by six times over the past five years, Indian shares have tumbled more than 50 percent this year, undermined by a savage withdrawal of funds by foreign investors and closing off an avenue for firms to raise funds.

The rupee has slumped to record lows and Asia's third-largest economy now looks like slowing more than many were anticipating.

"In my view there is no market in 2009," UBS' (UBSN.VX: Quote, Profile, Research) India head Manisha Girotra told the Reuters India Investment Summit.

Less than $1 billion of initial public offers have come to market since March in India, and more than a dozen have been deferred or cancelled.

There was unlikely to be any IPO activity in the first half of next year, and it would be 2010 before capital inflows showed a major revival, Girotra said.

Foreign investors have sold a net $13.7 billion of stocks this year as the stock market has collapsed from record highs, a marked turnaround from a record buying of $17.4 billion in 2007.

Private equity giant Blackstone Group (BX.N: Quote, Profile, Research) was more optimistic, with India Chairman Akhil Gupta telling the Summit falling prices of oil and other commodities would ease inflation and help the domestic-driven economy recover lost momentum.