International fund managers are re-discovering India as it becomes the star performer amongst Asias stock markets.
A lot of regional funds are increasing their weightings for India, says Richard Farrell, IIead, Asia Desk at Guinness Flight.
Foreign investors have brought over $359 million into the Indian market in June according to estimates. Thats nearly double the amount that was coming in during April and May.
The Indian market has climbed 37 per cent in the last six months and it has now zoomed ahead of China and Pakistan, which are the other two top performers in Asia. Only the tiny Sri Lankan market which has climbed 52 per cent has performed better.
By contrast countries like Thailand, Malaysia and the Philippines have dipped steeply in the last six months. Pakistan has risen 37 per cent in the last six months. The latest shift comes after months when fund managers, unnerved by political manoeuvrings, reduced their holdings in the Indian market. Many regional funds have been underweight on India since the beginning of the year when investor confidence was at its lowest.
That has been turning gradually in the last few months. In April, foreign investors brought in $ 148 million. That rose in May to around $ 200 million.
India has zoomed ahead at a time when a market like Thailand that is a hot favourite with fund managers has crashed precipitously by 35 per cent in the last six months. Says Farrell: Thailand is dreadful. The only good thing is that the market has fallen so far so fast that it may be working its way back.
Similarly, another hot growth markets like the Philippines has crashed by 27 per cent and Malaysia has dipped by 19 per cent. Says Jeff Chowdhary of Foreign & Colonial: Some people say that the South East Asian problem is over. Our view is that there is still a lot of pain out there.
India has emerged once again as a growth market at a time when many international fund managers are flush with cash made in markets like the US where the unstoppable bull run has taken the Dow Jones Index past 8,000.
Thats big change from earlier this year when India was at the bottom of the Asian charts along with Thailand which has moved from one economic crisis to another.
As India climbs steadily, foreign investors still remain confident about the prospects for the near future. A few optimists are beginning to predict that the market will cross the 5,000 mark fairly soon.
However, many investors predict that South East Asian markets will start to look attractive in the near future and that big fund managers will be bargain hunting across Asia soon. Fund managers insist that the uncertainties of Indian politics are still holding the market back.
