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Foreign fund flows into India zoom in Jan

Foreign institutions ploughed more than 10 times as much money into Indian stocks in the first three weeks of January as in the same period a year ago, and fund managers said it was not just tech stocks they were after.

Foreign institutional investors have invested a net $566 million in Indian share markets since the start of the year, against $55.9 million in January 2000 and $1.53 billion in the whole of 2000, according to data from the Securities and Exchange Board of India.

"In recent years it's been flows from foreign institutions that have driven the way markets in India go," Ajay Srinivasan, managing director of regional mutual funds for Prudential Corporation (Asia), said from Hong Kong.

"This is a big number, and will have a positive impact on a market that has been beaten down too much."

It already has. The benchmark Bombay index jumped 7.4 per cent in the first three weeks of January, including a 1.73 per cent advance on Monday.

"I'd estimate 40-50 per cent of the flows are into tech stocks and the rest largely into cement, pharmaceuticals and consumer goods," said Gul Teckchandani, chief investment officer at Sun F&C Asset Management India, with Rs 20 billion under management.

Top Indian technology companies in recent weeks have reported scorching growth rates in profits for the October-December quarter, fuelling a rush back into major Indian software issues.

Profits of stockmarket darlings Infosys Technologies rose by 125 per cent, Wipro Ltd by 325 per cent and Satyam Computer Services by 142 per cent.

"Indian tech companies are showing more than 100 per cent profit growth and are available at price-earnings multiples of between 20 and 50," said Teckchandani. "You can't keep these kind of shares down."

Many Indian software stocks fell sharply last year, tracking global tech sector valuations.

"The general Indian scenario is positive, with good signals from the government on divestment. And (estimated) GDP growth rates of 5.8 to 5.9 per cent (for the current year to March) are good," Teckchandani said. "I see the market moving up 10-15 per cent further in the days to the Union budget."

"We will continue to see money going into beaten-down stocks in sectors other than technology, such as the refinery stocks that are desperately cheap, and stocks like Bajaj Auto as well," said Srinivasan.

Teckchandani pointed out however the increased buying of Indian stocks is not as great as the headline number indicates.

He said if the sums invested buying Indian companies' shares listed abroad were included, last year's total would swell, narrowing the difference with this year's figures.

Moreover, February last year saw inflows of $619.8 million.

"The quarter numbers to March might look similar," said Teckchandani.

Bharat Shah, chief investment officer of Birla Mutual Fund, a large Indian fund with over Rs 45 billion under management, also sounded a note of caution.

"The year has just begun. It's difficult to draw any meaningful inference from just three weeks' data."

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