More Insight on the Opening of India's Stock Market to Foreigners

Earlier in the week, we brought you the news that

to individual foreign investors. Individual foreign investors have only been able to invest in the Indian stock market through investments like mutual funds, Exchange Traded Funds or the limited number of Indian stocks like Wipro

and Tata Motors

that are traded on stock exchanges outside of India. In an effort to give you some perspective from India we talked with Vivan Sharan, an Associate Fellow with India's largest multidisciplinary policy think tank, the

Observer Research Foundation

, to get his thoughts on India's decision to give foreigners greater access to the Indian stock market. Mr. Sharan said that "the move is a positive step for the Indian Capital Markets. To the global investor, it not only signals the country's active interest in overall progressive policy reform of financial markets, it also signals that India is willing to further integrate and deepen its Capital Markets." Noting that the full details of the proposal haven't been made public yet, Mr. Sharan said that "the release of the explicit policy guidelines by the regulatory agencies (RBI and SEBI) outlining specifics (scheduled for January 15th¬¬) would be instructive in predicting the effects on market volatility or volumes, and indeed the markets will wait for some clarity before reacting. However, the regulatory agencies in India are historically cautious, and it is unlikely that the regulations which are to be announced, would fail to take cognizance of possible increases in market volatility owing to increased flows." Mr. Sharan went on to say that "in terms of palpable organic impact(s) on the Indian economy, which is currently under-performing expectations, it is important to keep in mind that the economy needs all the help it can get. Any criticism of moves that integrate India with the global economy, would contradict the fundamental truth that the country's economy has benefited immensely from economic openness and globalisation since the early nineties."