India, along with Brazil, has emerged as the most favored investment destination among the emerging markets pack in a survey of 30 bluechip fund managers from Europe. In the survey conducted by London Stock Exchange and Capital MSL, 23 per cent of participants gave India and Brazil the most positive ratings with China in third place with 20 per cent.
But concerns remain high among investors in the short term (up to next 6 months) due to concerns over the inflation outlook and interest rates. But a majority of investors remain confident in the Indian growth story in the longer term, with 73 per cent of investors very confident in respect of India’s outlook in 12-18 months time.
While 46 per cent of those surveyed invest in the Indian market through the domestic exchange due to the liquidity available, a combined 48 per cent prefer to invest through London Stock Exchange or instruments like depository receipts and participatory notes.
Several Indian companies have listed on LSE and its junior market Alternate Investment Market (AIM) to get more visibility and attract international investors. Nearly half a dozen companies like outsourcing firm iEnergizer, infrastructure firm SKIL Ports & Logistics and oil and gas exploration firm Jubilant Energy were listed on AIM last year.
Firms like Great Eastern Energy and KSK Power Venture, who were listed on AIM during 2005 and 2006, have also transferred to the main market.This year companies like Essar Energy, Hirco and Greenko have raised additional funding through share sale on LSE.
Issues like corporate governance, disclosure and transparency figured among the critical factors for the investors before backing Indian companies, according to the survey. This was closely followed by management access, regulation and liquidity.
When looking at India as an investment destination, 17 per cent of investors cited inflation and corporate valuation as the most important investment criteria, followed by GDP growth(14 per cent) and regulation(11 per cent).
Consumer industries (14 per cent of top ratings), financial services (12 per cent), infrastructure (11 per cent) and technology (9 per cent) were highlighted as the most attractive sectors, followed by power (7 per cent) and renewable energy (7 per cent).
“The Indian growth story is well understood, and undoubtedly there is increased liquidity flowing towards India and its corporate marketplace, which looks set to continue in the medium to long term.
However, there is also increasing competition in India to attract this capital, and discerning investors have more investment choice than ever before,” said Nick Bastin, Director at Capital MSL, a corporate
“While short-term investor sentiment is by definition up and down in nature, the survey is emphatic that the medium and long term sentiment for India remains strong. This is backed up by the fact that Indian securities are mostly held for longer periods; as investment rather than speculative buys,” said Ibukun Adebayo, Head of Primary Markets for India at the London Stock Exchange.