The Hindu Business Line : Positive signs surface amid expectations of stock slide

Stockbrokers remain happy as the benchmarks maintained the momentum last week. However, the question now is whether it will last for a longer time? -

Dalal Street is likely to see the benchmark index stick to its already established range this week. For the short term, none seems to be expecting a grave correction or an upward surge.

But more and more market watchers have started talking about another possible round of sharp downward movement in the local market, tentatively some time between May and July.

Most tend to agree that signs of recovery may start trickling in only in the second half of FY-09. But none is sure as yet.

Economists appear to suggest that China and India stand between the current global growth deceleration and a confirmed depression. But India needs to show more flexibility and agility than what is visible now.

More outflow

According to market intelligence, there may be further outflow of foreign portfolio investments in the next few months. Among the local investors, not many are currently opting for strategies set to stay invested beyond one year. Some insurance companies, high net worth individuals and a few overseas and local funds have, of course, not stopped selective stock-specific investments. In the retail investment category, wait and watch seems to be the buzzword.

In this kind of a situation, not only volume suffers, but a clear trend remains amiss.

A hardly perceptible undercurrent of preparation, however, flows for a section of long-term investors. Those who want to join the next Indian equity market bandwagon are understood to be either planning to raise funds locally or have begun raising funds abroad.

Having seen many out of 120-odd hedge funds bolting from Dalal Street under redemption pressure at home, and India-specific funds postponing fresh investments indefinitely after losing their AUMs by as much as 70 per cent in 2008, good new is coming from private equity funds. These funds are readying themselves to buy out Indian assets at historically cheaper values and take a risk.

PE assurance

According to a recent research report by the Emerging Markets Private Equity Association (EMPEA), India-dedicated funds raised $7.7 billion in 2008 against $4.6 billion in 2007.

Bucking global trends, 210 private equity funds focused on emerging markets raised a record-breaking $66.5 billion in 2008, a 12 per cent increase over the $59 billion raised in 2007.

Emerging Asia continues to dominate the private equity landscape in developing countries. Emerging Asia represented 60 per cent of the funds raised in 2008 versus 48 per cent in 2007. Emerging Asia funds raised $40 billion, a 39 per cent increase over 2007, driven by a significant increase in capital raised by China-dedicated funds. Funds focused on China raised $14.5 billion in 2008 compared to $3.9 billion in 2007. No other single region, among the emerging markets, accounted for more than 10 per cent of the capital raised.

(Responses may be sent to jayanta_mallick@thehindu.co.in)