The Wall Street Journal (Feb 27, 2004; pg c14) reports today that Managers of International Mutual Funds in the US are raising their recommended weightings for india among other SE Asian countries. Apparently India is one of the most popular destinations for portfolio investments.
Before you rush out and buy an India Mutual Fund, be very cautious! I suspect people in the know have already bought the stocks. An article such as this only boosts the prices of the stock which they already own. You would be coming in fairly late and then the large investors dump the stocks and you are left with holding a high priced stock. This is what happened with the bursting of the Internet bubble in 2000. The time to buy India stocks was three years ago.
I am also not a big fan of 'portfolio' investments. Here, the investors can cash out at a moments notice and drag the market with them (like what happened in Malaysia, Indonesia, Thailand in 1998). The better investment is Foreign Direct Investment (FDI), where investors are actually helping grow the business by investing in expansion programs (and $$$ of course), bringing in new technology and developing a long-term marketing strategy with the management. In such FDI cases, they cannot just sell their entire plant overnight. FDIs are thus better indicators of long-term investor appetite. In this arena, India is getting its pants kicked by drawing in only about 10% of the $ 50 billion that China is attracting per year. Even Chile (a total country population of 14 million – the size of Bombay) is getting ~ $ 4-5 billion as FDI (slightly less than india). Ouch!
Now that is sobering!
.a.
Arun Shanbhag 
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