Capital markets in India have seen steady domestic flows: BoA's Balakrishnan

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Edited excerpts: This year is looking quite good. We got off to a good start with an mergers and acquisitions (M&A) announcement, the Lodha qualified institutional placement (QIP) and British American Tobacco Plc (BAT) sell down in ITC. We also have a couple of initial public offerings (IPOs) which are filed out there.

And then a number of others which are mandated, and literally every week, we have one or two IPOs we are invited to pitch for. So, lots of companies could look to have IPOs in the second half of this year. Then there is the follow-on capital raising that remains strong.

There was a lot of sponsor-driven activity last year. And I think once again this year, going by the number of processes that are on, financial sponsors, both in terms of investing and in terms of exits, remain extremely active. M&A activity has been muted. What would you attribute this to? I would say that the one segment in which we have not seen that much activity is foreign strategics (companies) putting fresh capital in M&A.

We are seeing lots of foreign strategics putting fresh capital in greenfield assets or in their own businesses. So, it's not that there's no FDI coming in, but inbound strategic M&A activity has been muted. See, the cost of capital in the West has increased a lot while the Indian market has not seen such a steep increase.

That has led to higher valuations in India versus valuations in the West. That is why for a western strategic doing an M&A deal in India is difficult today, because buying at these higher multiples (in India), when you are trading at a much lower multiple (back home), is difficult. And therefore, taking some money off the table is attractive.