Destination India

A booming stock market, rising rupee and globally ambitious corporate mergers and takeovers have placed India on the global investors' radar. The story of India unlimited is suddenly real.

The buzz is unmistakable. The BSE Sensex crossed the 6000 mark thrice in a week, the dollar tumbled against the rupee to pierce the Rs 45 level, FIIs pump in over $750 million (Rs 3,375 crore) in just 15 days to cross $6.3 billion mark in 2004, big-tag investors like CalPERS, Fidelity, Principal and Aegon are queuing up to grab a slice of the action. Nearly 30 corporate chieftains, including J.J. Irani of Tata Sons, B.V.R. Subbu of Hyundai and Adi Godrej of Godrej, are in New York with ICICI Bank's K.V. Kamath wooing bankers with the story of "India Unlimited". Macquarie Securities, Lehman Brothers, Bear Stearns and Credit Suisse First Boston are about to commence broking operations in the country. India is definitely the happening place this season for global investors.

WHO IS COMING?

The $170 billion CalPERS has pumped over $110 million into Indian stocks in three months. The $1,200 billion Fidelity, Asia Principal Global Investor, San Francisco Retirement Trust and insurance giant Aegon are others interested in India. WHY ARE THEY COMING? India has accounted for more than 20 per cent of FII inflows to top emerging markets and is seen as one of the two must-invest, high-growth markets. It has democracy, a legal system, modern markets and a wide swathe of high-return tech as well as brick-and-mortar companies. WHAT COULD BE THE RISKS? The usual suspects include high fiscal deficit of nearly 10 per cent (in Centre and states), inflation, rise in interest rates, energy costs and infrastructure. Investors are also concerned about the anti-reforms left and right-wing religious extremism.

A year after investment banking firm Goldman Sachs put India among the fastest growing economies in its BRIC (Brazil, Russia, India and China) report, the India story is still unfolding. Even if it had a serious hiccup in May this year when the Congress-led Government came to power supported by the Left. The Sensex crashed by over 800 points but the mid-May nightmare is long forgotten.

Indeed, the FIIs found an opportunity in the sub-5000 levels to re-enter India after Manmohan Singh was sworn in as prime minister with reformist collaborator P. Chidambaram as finance minister. Since the Government's formation the market has sold two mega-billion dollar issues of Tata Consultancy Services and National Thermal Power Corporation. SEBI has registered 124 FIIs and 367 sub accounts since January 2004, taking the total FIIs to 621 and sub accounts operating from India to 1,713. In this period FIIs have poured in over $2.8 billion into Indian stocks pushing the Sensex towards its historical high of 6252.

THE DOLLAR RUSH   At the current rate of inflows, the FII    investments, now at $6.3 billion, may   cross the all-time high of $6.5 billion of   2003.

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The FII interest is wide and varied, ranging from auto components to banking stocks to healthcare, garments and even sugar. Mark Mobius, MD, Templeton Asset Management, says, "India offers unique domestic market dynamics due to the sheer size of its population and some outstanding capabilities, particularly in software and pharma." Between July and September 2004 itself, the FIIs have raised stakes in companies by stupendous levels: by 29 per cent in gem and jewellery outfit ST&B International, 20 per cent in towel and bed-linen exporter Welspun and 16 per cent in petrochemicals giant IPCL. Foreign funds now hold over 10 per cent equity in 80 Indian companies. And a recent Morgan Stanley report reveals that nearly 20 per cent of the FII inflow to top emerging markets has come to India which is "a favoured market". Says Shitin Desai, MD, DSP Merrill Lynch: "India excites investors as its firms are globally competitive."

The private equity market too is growing exponentially. Last week, Singapore-based investment firm Temasek Holdings, which holds equity in ICICI Bank, Apollo Hospitals and Matrix Labs, picked up 6.9 per cent stake in rice exporter Satnam Overseas. Through another investment arm, Merlion Investments, it ploughed $50 million into Punj Lloyd. Add the Rs 700 crore-plus acquisition of Blue Dart by German monolith DHL and the emerging picture is a vindication of the ability of Indian operations to deliver.

"The Indian market has considerable breadth in its range of stocks." HAZEL McNEILAGE MD, ASIA PRINCIPAL GLOBAL INVESTOR "India story is compelling as high value-added services become tradable." MARC FABER EDITOR, GLOOM, BOOM & DOOM REPORT "A paradigm shift in the quality of our securities market has got acclaim." G.N. BAJPAI CHAIRMAN, SEBI "India offers unique market dynamics due to its sheer size." MARK MOBIUS MD, TEMPLETON ASSET MANAGEMENT "FIIs see a growth opportunity in India and an economic momentum." K.V. KAMATH CHAIRMAN & CEO, ICICI BANK "It is a story of returns. If you are in Asia, you can't ignore India." NIMESH KAMPANI CHAIRMAN, JM MORGAN STANLEY "Investors realise that the Indian firms can compete and deliver." VIMAL BHANDARI COUNTRY HEAD (INDIA), AEGON INTERNATIONAL "The Government has done a great job in positioning India." UDAY KOTAK V-C & MD, KOTAK MAHINDRA BANK "The boom is a vindication of India's potential and its market systems." RAKESH JHUNJHUNWALA PARTNER, RARE ENTERPRISES

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