The unprecedented terror attack in Mumbai is likely to exert additional pressure on foreign investors' sentiments, already hit by the global economic downturn, in the short-term, rating agencies said on Monday.
"There is an uncertainty among the foreign investors, especially FIIs given the adverse sentiments in the aftermath of the Mumbai terror attacks...There may be further flight of the FII money from the market in the coming days," global rating agency, Standard & Poor's managing director and regional head, Ravi Mohan told PTI.
However, foreign investors are likely to come back once there is normalcy by way of right policy measures from the central and state governments to enhance the national security," he said.
"Investment sentiments of FIIs will depend on the policy measures from the central and state governments. On the FDI side, I don't expect any slow down as the capital demand is very high in different sectors," Mohan said. Nearly 200 people were killed and about 350 injured in a spate of terror attacks that rocked the commercial capital for three days, exposing the vulnerability of the world's largest democracy to terrorist operations. Experts said those sectors like tourism, hospitality and automobile may also feel the heat of the negative sentiments after the recent attacks but is likely to regain the momentum in the short to medium term in line with the improving domestic situations.
"These sectors would see a major slow down in the short term. However, as far as the overall economy is concerned, I don't see any major repercussions as terrorist threat is not limited to this country.
"Besides, India's economic fundamentals remains strong," Fitch Ratings' MD, Amit Tandon said. Besides, rating agencies are unlikely to relook at the sovereign rating of the country in the backdrop of the recent attacks as the 'threat of terrorism is same everywhere across the globe', he said. "Rating agencies normally would not form opinions on the short-term aspects of an economy. We need to see things over a period of 2-5 years. The fundamentals of the Indian economy still remains strong," Tandon said. A similar view was expressed by ICRA's head of corporate ratings, Subrata Ray who said the investment prospects of the country may get impacted in the short term. "Foreign investors may watch the situations evolving in the next few months and corporates are likely to postpone their projects until things go back to normalcy," Ray said. India witnessed a sharp rise in the outflow of foreign funds in the current financial year on account of the global credit crunch. FIIs pulled out a total of around Rs 54,000 crore (Rs 540 billion) as at November-end in the current year from the system.
