The Hindu Business Line : Home and beyond is where the money is

I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy. You won't get there by reading `Now is the time to buy' - Peter Lynch, who ran Magellan Fund for 13 years

If you have been listening to catch-phrases like `home is where the money is' for far too long, this may be time for you to tune in to folks who are telling you to pause for a moment and look at markets other than India for deploying part of your surpluses.

Those folks - and they are an increasing tribe - include fundmen who are encouraging you to buy securities from all over. It has to be a medley of markets, they argue, while underscoring the performance that has been piling up in a host of emerging economies and elsewhere.

At the heart of their argument lie the perceived merits of geographical diversification. Do not restrict yourself to just one country or region, the same way you should not restrict yourself to a single stock or sector, is the logic they hold out.

An argument like that does sound grand, but its foundation is quite unpretentious: The prospect of a higher outlay, up to $50,000 per annum, in foreign markets by an individual investor. For mutual funds, the permission pertains to $3 billion internationally.

Mind you, such a thing as this was not possible till recently; Indian regulators have allowed it to happen only lately, subject to the strictest limits. But now that winds of change are blowing more unreservedly, the investor who is fixed on international assets need to consider a range of other issues in addition to what are spawned at home.

The proponents of global allocations include groups such as Fidelity, which is strongly rooting for more such investments by Indians. Ms Ashu Suyash, who heads its asset management business here, feels that sectors that are displaying positive trends across the world could be easily under-represented in a single-country portfolio.

In other words, local investors need to understand that here are opportunities to be found on the global platform, ones that may not be located at home.

India, it is argued, has a "positive, yet low correlation with most developed markets - lower than what those markets have with each other - and a low correlation with many emerging markets as well". This, in plain English, implies that we will probably move along the same track as another nation, but probably not in the same manner.

Summing it all up is this sure fire logic - for all the surge in Indian equities, we are just about half a per cent of the world's market capitalisation. You can chew on that after you have finished reading this column.

Before we end, could we bring up some trivia, all of which are eminently relevant?

* No single country accounts for over 5 per cent of the global stock market. The exceptions are the US, the UK and Japan. The US makes up well over 40 per cent; the other two are heavyweights too, though their contributions are smaller.

* Lots of tiny countries - compared to India, they are clearly midgets in terms of size and population - like Sweden, Korea and Spain are way ahead in this respect.

* It is not that India has been a top performer every year (even during our most memorable bull run). There are markets that have given positive returns when we have faltered. But, like history, performance repeats.

Feedback may be sent to nilanjan@thehindu.co.in

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Home and beyond is where the money is