Investors from the GCC countries will be the first foreign participants to tap the Indian stock and bond markets through the newly opened window for qualified foreign investors, or QFIs, a scheme that targets to lure between $ 80 billion and $ 90 billion to the country over the next two years.

The new investment initiative will allow GCC residents, including expatriates and nationals, to directly invest in Indian equity, mutual funds, and debt markets. QFIs also comprise foreign pension funds and foreign trusts.

A high-level Indian delegation led by R. Gopalan, Secretary of the Department of Economic Affairs, was in Dubai on Monday as part of a GCC roadshow to woo Arab and expatriate investors through the QFI route. Present at the event were Indian Ambassador to the UAE M.K.Lokesh, and Indian Consul General in Dubai Sanjay Verma.

The Indian team included Thomas Mathew, joint secretary (capital markets) of the department of economic affairs; S. Madhusudhanan, deputy general manager, Securities and Exchange Board of India, or Sebi, and senior officials from National Stock Exchange and Bombay Stock Exchange.

Scores of Arab investors are expected to tap this opportunity to enter the Indian capital market.

Indian officials were quite upbeat about the country’s growth prospects at the roadshow despite dismal data showing a dramatic slow down in Asia’s third largest economy to 5.3 per cent growth, the country’s lowest in nine years. Latest data also reveals that in the first eight days of June alone, foreign investors pulled out Rs10 billion, mainly on account of volatility in rupee, which is hovering around the 56-level against US dollar. They had pulled out Rs 3.47 billion from the equity market in May and Rs 11.09 billion in April.

However, Indian officials argue that despite all these short-term setbacks, prospects for foreign investors are getting brighter with India currently on course to invest up to $ 1 trillion in infrastructure over the five years, of which it targets to attract 50 per cent from the private sector. Other positive factors auguring well for the economy include softening inflation, falling global crude oil and the massive infrastructure drive.

At the investors meeting in Dubai, Gopalan said the QIF route would provide flexibility to investors in terms of options and bring in stability to the market. Unlike investments from FIIs (foreign institutional investors) that are generally short term in nature and hence vulnerable to global factors, QFI investments are longer term and therefore ensure more stability to the market, Gopalan said.

As per the Indian finance ministry’s directive, market regulator SEBI last month eased norms to attract QFI investments from the GCC and 27 European Commission countries into mutual funds, stocks and corporate bonds. So far the government has approved direct QFI investments from 45 countries that are members of the Financial Action Task Force, or FATF. The GCC is a full member of FATF.

According to finance ministry officials, overseas individuals are anticipated to invest between $ 80 billion and $ 90 billion in India over the next two years. Of this $ 30-40 billion will be to develop the infrastructure sector.

The roadshow titled, “India: The Incredible Investment Destination” is a joint initiative of government of India and Deutsche Bank.

The Indian officials said Indian stock market has been the second best performing market among the major global markets.

“India has an impressive growth story over the past several years. We are hopeful to get the growth rate of over seven percent this year. This is the right time for investors to benefit from the great growth opportunity.”

Investors should benefit from Indian stocks, which are now down 20-30 per cent due to volatility triggered by global factors. During the past three decades the average return from Indian stock market has been around 18 per cent, far higher than the returns from asset classes like gold and bank deposits, officials pointed out.

As part of India’s disinvestment policy, many public sector units are about to go for IPO in the current fiscal year providing several attractive investment opportunities to foreign investors, they said.