The Hindu Business Line : Indian stocks catch the fancy of global retail investors

THE dollar inflow into the Indian stocks is not just fuelled by foreign institutional investors, but individual investors living abroad are now becoming major investors in the domestic markets.

Encouraged by the "Indian story", retail investors in many parts of the world are increasingly participating in the Indian bourses by investing in offshore India funds.

In fact, growth witnessed by offshore India funds has left even asset management companies (AMCs), which run them, surprised.

Deutsche Asset Management Company's Deutsche India equity fund mopped up over $70 million in less than two months of its existence. The fund is being sold to retail investors in Japan. Encouraged by the response this fund has generated in the Far East, the company is launching yet another fund, this time for investors in Singapore, according to Mr Sandeep Dasgupta, Chief Executive Officer, Deutsche Asset Management.

Similarly, Birla Sun Life's Excel India Fund has sparked interest among Canadians. Mr Bhim Asdhir, President and CEO Excel Funds Management Inc, said that surprisingly most investors in the fund are native Canadians and not expatriate Indians.

"In the last year and a half, awareness of India has gone up considerably among Canadians. In fact, we have launched a combined India-China fund and are also in the process of launching some sector-specific funds for India to meet investing demands of several of these investors."

These funds are sold through insurance advisors, relationship managers of banks and third party distributors.

Sheer numbers in terms of market size of products such as mobile phones is enough to dazzle prospective investors about the growth potential of the Indian economy, said Mr Asdhir. The Excel India fund's assets under management is growing at the rate of 5 per cent every month, he added.

The spurt in the interest in India offshore funds is attributed to two reasons. First, the demographic profile of India, along with future economic growth and corporate performance makes it a destination where projected returns on investments are very high.

Second, the performance of the market over the last year has been encouraging despite the blip in May 2004.

Managers of offshore funds say that the growth witnessed in 2004 is only the proverbial tip of the iceberg. Foreign investors continue to have "sketchy knowledge" about India. When compared to the awareness levels that these investors have about China, it is evident that there is a lot of work left, according to the AMCs.

AMCs view the next 6-12 months as key for the growth of India offshore funds. International sales divisions of several AMCs are conducting road shows across the world, especially the Far East and Europe. The year 2005 will also witness various delegations of potential foreign investors visiting India to understand the country firsthand before investing money in its future.

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