More foreign fund inflows seen ahead

Global fund managers and chief investment officers (CIOs) expect the strong foreign institutional investor (FIIs) inflows into India to continue as the country is expected to be the fastest growing countries among its Asian peers.

Fund managers who attended a Confederation of Indian Industries seminar on 'Investing for value-fund managers perspective' were gung-go about the huge growth potential, fair valuation and strong corporate governance followed by Indian companies.

They expect these factors to change global investors' perception towards more exposure to Indian equities.

Narender Nagpal, head of equities, Deutsche Equities India, one of the speakers at the seminar, said among Asian markets, Indian companies have shown the highest growth rate. "In the long term" Asia is expected to attract more exposure from foreign funds as it is growing faster and is cheaper compared to other global markets.

"At our recent annual investor conference, over 200 investors participated from all parts of the world, making it the biggest ever conference of its type in India. Most investors were positive on the structural opportunity in India."

The last few months in fact have seen rapid influx of foreign institutional money into Indian equities, with the benchmark Bombay Stock Exchange Sensex touching new highs. In February alone, shares worth Rs 22,388 crore were purchased.

FIIs have invested a record $1.91 billion (Rs 8,376 crore) in February 2005 so far. The earlier record was set in April 2004, when FIIs pumped in $1.68 billion (Rs 7,638 cr) on a net basis.

According to data released by the Securities and Exchange Board of India, FIIs have purchased shares worth Rs 22,388 crore and sold shares worth Rs 14,012 crore.

In the first two months of calendar 2005, net FII investment has crossed the $2 billion mark to touch $2.01 billion, compared with the total investment of $8.52 billion in calendar 2004.

In the last nine months they have been net purchasers of $7.12 billion of shares. In the last four months, between November 2004 and February 2005, FIIs have pumped in $5 billion in Indian equities through open market purchases and a slew of initial public offerings such as National Power Thermal Corporation, Bharti Shipyard, Deccan Chronicle and Indoco Remedies.

DSP Merrill Lynch MF's president & chief investment officer S Nagnath said global funds are seen investing in India to profit from the transaction that the country is going through. The infrastructure boom, high consumption and outsourcing are going to play a crucial role in rapid economic growth.

Sanjeev Duggal, director and chief investment officer, HSBC Asset Management India, said, "India's long-term story is good with the investment cycle on a high."

Akash Prakash, director, Tamasek Holdings India, said, "The valuation of Indian companies are not overly stretched and India is a market most global investors can't afford to ignore. Private equity investors and FIIs have made money in the Indian markets and because of strong corporate governance, India is expected to attract more foreign funds."