MUMBAI, Dec 16: India needs to diversify the sources of foreign investment allowed into the country in order to avoid some of the pitfalls that SE Asia has fallen into, a top official of a foreign fund said on Tuesday.

"I think one approach should be to broaden the sources of capital flow into the country by widening the definition of investors that can invest in Indian markets," IndOcean Venture Advisors Pvt Ltd chairman Pradip Shah said.

"It should not just only be FIIs but a whole range of investors that are allowed with minimal hassles," Shah told Reuters in an interview.

India needs to attract more types of foreign monies which will balance existing investments made by FIIs, Shah said.

IndOcean operates a $58 million offshore fund in which the Soros group and Chase Capital Partners are principal investors.

"Get in high net worth individuals. For instance, proprietory funds of companies," Shah said.

"Make that apparent to the world that we are welcoming these kinds of monies and therefore if some FII sells, then someone else can step in," he said.Indian markets recorded a net outflow of FII funds for the first time since they were allowed to invest in India in 1993, official data show.

Shah's comments come while the country is waiting to vote for a new government and the rupee is banging against all-time lows near 40 per dollar.Prime minister Inder Kumar Gujral resigned after the Congress party cut off crucial support to his United Front alliance last month, and an election is expected early next year.

FII outflows amounted to $148.7 million in November compared with a net inflow of $272 million in October, the Sebi said earlier this month.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.