Top banker says Indian markets correction looms

Singapore, Jan 29: India's real estate and stock markets are heading for a correction, with a liquidity crunch in the banking sector likely to accelerate the trend, a top Indian banker told the Financial Times in an interview.

Indian stock valuations are inflated and property prices in many areas are beginning to exceed what people can afford to pay, said Deepak Parekh, chairman of Housing Development Finance Corporation , which controls India's second largest private-sector bank.

''I'm concerned about overheating real estate prices, I'm concerned about overheating of stock markets, that some of the valuations are not justifiable,'' the FT quoted Parekh saying.

''The kind of returns people got in the last two to three years, they would be foolish to expect this year. The Indian story is fully priced.'' Foreign investors eager to tap into India's rapid economic growth of above 8 percent have been pouring funds into stocks and specialist private equity funds investing in property and other sectors, the newspaper said.

India commanded nearly half of foreign fund flows into emerging markets tracked by Morgan Stanley last year, with the average market capitalisation last year nearly 50 per cent higher than a year earlier, it said.

Reuters