How important is FII participation in the stock market?
The FIIs currently own about 40 per cent of the existing market free float (stock not owned by promoters) with an average delivery volume of 30-40 per cent. We are seeing FIIs from different geographical areas, even from non-traditional areas like Japan and Korea. Mutual funds, too, are actively participating in the market. Domestic money will also be an important driving force. What kind of returns will equity investments deliver over a three-five year period?? From 2003 , the markets have gone up and mid caps have done even better. Earnings growth for some large caps has been over 20 per cent, and even more for some mid caps. While it may not be possible to sustain such earnings, an average of 15-20 per cent is what one can expect over the next two-three years. And if PE multiples get re-rated, there could be some further upside. Overall, going forward, earnings will play a major role. Small caps are not ideal for retail investors, unless there is a specialist view with proven track
