FIIs pulled out $1.5 billion in the four days after Sebi proposed the PN ban on October 16. But the selling stopped after Sebi issued clarifications and assurances. FIIs then brought in $700 million in the last three days of last week.

In any case, savvy investors always go to a market where the growth story is strong. Leading foreign investment banks like Merrill Lynch and Lehman Brothers have forecast that India and China will see high growth of 9-11 per cent against 1.4 per cent GDP growth for the US next year, 1 per cent for Japan, and 2.3 per cent for Europe.

India Inc has not showed any signs of a slowdown so far — top companies have posted 20-25 per cent growth in their bottomlines in the second quarter of the current fiscal (2007-08). The sustained growth in earning per share (EPS) will remain an attraction for all investors, not FIIs alone. India’s P-E ratio is 22.4x forward earnings, still low when compared to bubbles in Asian markets like Japan’s 70x earnings in 1989, 100x earnings in Taiwan in 1990, and 30x earnings in South Korea in 1991.

Moreover, with the US sub-prime drama still unfolding, there may be another interest rate cut from the US Federal Reserve. This means more US funds will exit that country in search of growth markets like India and China where foreign investors have reaped a bonanza in the last two or three months. They have preferred India over other Asian markets like Taiwan, South Korea and Thailand. Foreign funds even pulled out around $16 billion from South Korea this year.

... contd.