The post-Lehman Brothers world is seeing a new pecking order where India is emerging as a most favoured investment destination.
New international investors are making their own discovery of India.
The post-Lehman Brothers world is seeing a new pecking order where India is emerging as a most favoured investment destination.
While the avalanche of money that has flown into the country and the index performance stand testimony to this, there are subtler changes taking place.
The composition of flows itself is changing with Chinese and Middle Eastern institutional funds taking more active participation.
Market sources said a large middle-eastern sovereign fund pumped in over a billion dollars in the days before election results.
Among the Middle East countries, UAE has the highest number of registered foreign institutional investors (FIIs) at 15.
Six FIIs are registered in Oman, three from Kuwait and 2 each from Qatar and Saudi Arabia. There are six China-based FIIs.
At present, out of 1,659 FIIs registered by Sebi, US still accounts for a maximum of 566 institutions. The UK-registered funds come second at 266, while Luxembourg accounts for 106.
Experts also notice a significant change in the way these entities approach investments to India. The word “risk” is giving way to “returns”. Therefore, risk premium is now “returns premium”.
Bhanu Khatoch, deputy CEO, JM Financial Mutual Fund, says the change is very obvious. “The people I meet are more open to India. The change can be seen in the language they use. You don’t see them talking about risk premium anymore. They call it returns premium. They have realised there is nothing much in terms of returns from the Americas and Europe and it is markets like India where there is visibility of earnings and scope for returns.”
Apart from returns, these funds are also looking to derisk their portfolio from increasing threat they face from a potential dollar threat. There is a view gaining ground that a significant portion of money received in the last few months is long term allocation and is not going to go out in a hurry.
Harish Vasudevan of SVS Securities likens it to the great Indian obsession —- jewellery. “If you gift your mother a gold coin and you ask her back after a few days to sell it at a profit, she wouldn’t mind. But, if you buy her a gold necklace, no matter how much so ever the price escalates, she’s not going to part with it. The flows we are seeing now are such long term flows from new investors from Chinese and Middle East, who are beginning to build their India portfolio. These funds will not exit in a hurry,” Vasudevan said.
Even among the traditional investors, India preference is increasing. When the choice is between India and China, India is increasingly being preferred.
Sai Krishna Tampi, head portfolio management, Credit Suisse Securities, said momentum in in India’s favour. “Global investor risk appetite has moved from panic to close to euphoric levels. Several global investors who were overweight China and underweight India, have begun to favour India,” he said.
Fund managers who’ve missed the sharp rally realise that they have to allocate more to India which has higher beta and higher growth, if they want to beat their respective benchmarks, he said.
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