Foreign funds eye gains in India

Foreign funds eye gains in India

By SiliconIndia   |   Thursday, 04 November 2004, 08:00 Hrs
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MUMBAI: It has not been even a week since David Ellington of a US fund management firm arrived in India to explore the possibility of investing a part of his company's $12 billion assets into the local capital market.

And he has already decided to make a pitch before the board of the San Francisco Employees Retirement System to plough money into Indian stocks to take advantage of low valuations, strong corporate results and robust economic indicators.

Like Ellington, a slew of overseas fund managers are looking to make their fortune in India as Asia's fourth largest economy sheds its decades of casino like stock trading practices in favour of world-class regulatory systems.

Adoption of stringent corporate governance norms by companies and easier investment guidelines are also helping foreign institutional investors loosen their purse strings in India.

"I am here to gather data and other relevant information to help our management decide whether or not to invest in the Indian market," said Ellington, trustee and commissioner of San Francisco Employees Retirement System Board.

"While I can't tell you for sure when we are going to enter the market, I am personally very excited about the investment prospects in India," Ellington told IANS on the sidelines of a business seminar in the financial capital of India.

Foreign funds have collectively put in nearly $6 million in the current calendar year so far into the Indian equity market, up from $4.5 million worth of inflows in the corresponding period last year.

The number of registered foreign institutional investors in the country has also swelled from 517 at the end of last calendar year to 623 till date, according to the market regulator Securities and Exchange Board of India (SEBI).

India's capital market won a major endorsement in the middle of this year when nearly $170 billion pension fund California Public Employees' Retirement System, known as CalPERS, decided to enter into local trading ring.

The global fund major, whose moves are closely watched by other overseas investors for possible leads about the attractiveness of an emerging market, has invested as much as $100 million since its foray in April this year.

"Till August, we had invested just $20 million in the Indian market but we scaled up our exposure significantly after that," said Priya Mathur, vice chair (investment committee) and trustee of CalPERS.

"Today, we are holding $100 million worth of equities in India. The country is one of our main focus areas among all the emerging markets," she said.

"While we are not looking at China from the equity investments perspective, we are very bullish about India. I can't make any near term investment projection but we will continue to put money to use as we see opportunities here."

Mathur said stocks of IT, pharmaceutical and manufacturing companies are the main focus areas of CalPERS in India.

Despite the bullishness on the part of overseas fund managers, experts say India would have to do more to improve corporate governance and enhance the depth of the market to absorb large-scale money inflows.

"From an investment destination perspective, there has been a big change in the Indian capital market in recent years," said Arun Mehra, head of investment of Fidelity Fund Management India.

"But there are some issues related to liquidity and trading norms that may hamper overall growth if not distract foreign investors," he said.

Agrees Hazel McNeilage, managing director of Asia Principal Global Investor (Singapore) Ltd, which manages assets of $125 billion out of which $800 million is earmarked for the Asian emerging markets.

"We like the quality of corporate management here. There has been tremendous strive to improve competitiveness," she said. "But I really doubt whether the market has the depth to absorb tens of billions of foreign investments."

McNeilage, whose company has made significant investment in Indian stocks in the last few years, said since the size of the Indian market was too small, it was difficult to get more and more institutional investors.

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