The Hindu Business Line : Positive stretch likely to continue

IF the perception that China and India are rewriting the Das Capital is globally gaining currency, the international capital flow should continue to gravitate towards the two markets. These Asian giants are not only increasingly influencing global wages, interest and profit, but also shaping the emerging new international trade and economic order.

For India, the early pointers to the global portfolio investments shift are clear. Signs are that the increasing FII fund flow could turn into a gold rush if the economy does not seriously falter.

It is not just the GDP growth of 7 per cent, but a spectrum of economic numbers that have begun to change the dynamics for a paradigm shift. For the overseas funds, the corporate India, backed by an economic resurgence, has opened up a new horizon.

In the first few years of this millennium, performance of the domestic companies has undergone a sea change. With the gradual opening of the economy, the players in manufacturing and service sectors have been expanding in terms of capacity and geographical spread.

Interestingly, low-key overseas acquisitions have been going up at a steady pace by the Indian outfits without a great deal of political opposition. The resistance towards the Indian labour also melted faster than the time it took to build.

Executives of the cross border companies appear to have ceased to consider India as a punishment posting. Image makeover of local equities is being reflected in increasing valuations and growing fund flow.

The impression one gets talking to several fund managers and institutional brokers working for investors in the US, Europe, Asia and Australia is one of a long-term bet on returns from local equities.

Amid the current trend in pushing money to emerging markets, both hot and warm, interest for Indian equities appears different. In the international portfolio management circles local equities have been gaining in respectability because of their consistency and relative soundness of the overall market even though the operational scale may not be too high.

Investment experts seem to veer round the idea that the performance and growth prospects of India Inc inspire confidence as it balanced the dependence on robust domestic demand and exports relatively fine than their counterparts elsewhere in the world.

The occasional corrections in the key domestic indices do not seem to impair the views of the FIIs, who have entrenched themselves well in the local market.

However, some experts caution that an unfolding craze for the domestic equities may overheat the market at a given point in time calling for a sharp valuation readjustment. But apart from demand side problem and supply side constraints on Dalal Street, the comfort level with the local equities seems to be rising.

The last week was a testimony to the steady demand for local papers. The overseas investors kept on pumping in money at the net level. The local mutual funds were also net buyers.

The fact that the Reliance group's two factions moved ahead further in drawing up future road maps is likely to be positive for the market sentiment. Assuming that the money flow will not slide dramatically, the outlook for the market this week remains positive.

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