The Bangalore Express Has Left the Station

[ERROR- We apologize, but this post mistakenly refers to an article far out of date- from 2004.  We still keep the article below, and recommend reading comments left by readers as one sheds some light on India's recent performance.]

India is currently taking the lion's share of Asian fund flows.

NDIA attracted nearly 45 per cent of all foreign fund flows into Asia, excluding Japan, during the week up to April 21.

According to latest data published by EmergingPortfolio.com Fund Research, a firm that tracks about $2.5 trillion in assets globally, India received $105 million of a total $238 million that flowed into Asia that week.

                                                          In comparison, Korea attracted $37 million during the same period.

                                                          Dedicated funds have invested about $1.12 billion in Indian equities so far this year.

That is more than a fourth of all flows into Asia this year and a fifth of a total of $5.2 billion that Asian countries attracted in 2003.

Here's what's scary: India has run pretty well in 2006 so far and all it took was $1.12 billion to do it. Perhaps this is usual, but here it seems like the formation of just one big India-focused hedge fund would be enough move the market pretty hard. Is everyone just buying the index when they think of India? We thought the market had tons of companies, there should be enough companies available that things don't get overbid. Thus maybe its just the big names being bought? It seems strange, but if someone thinks we're compeletely off the mark here, please do leave a comment.

Comments

[karun]

$1 billion over three months does not single handedly move the market in India. The rally (and the recent and ongoing correction) has been mostly powered by domestic capital (including margin trading) and not just foreign capital. Most rallies in the Indian markets are powered by the local brokerage houses who use leverage a lot. The current correction is directly linked to the regulators increasing the margin rates for derivative trading (which affects domestic brokers much more than foreign funds). But there is still a lot of money coming into domestic mutual funds so the market should stay strong after this correction. But there seem to be a lot of India-specific funds starting up, so foreign capital should become more influential as time goes on.

[Kevin]

Hey, this article was misleading. The 'the lion's share' link is to an article that is two years old! it was written Thursday, Apr 29, 2004.

Please explain how you are using historic data in this context.

[The Other Stalwart]

My apologies for that. Perhaps this post was done in too much haste. I probably should have noted that April 28th has yet to happen this year! Nevertheless, the comment left by Karun is quite interesting. Local demand is the factor I was forgetting as well.

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