Solomon Barney Smith, Americorp Holding and Chase Manhattan Bank have decided to establish their presence in Indian stock markets. Chase Manhattan Bank would be making an entry by virtue of taking over Fleming operations globally.
Americorp Holding is setting up a Rs 5,000 m open ended offshore technology fund in association with Jardine Fleming.
Foreign institutional investors (FIIs) have steadily increased over the years and so have their exposure to the Indian markets. The key economic indicators remain very positive; inflation is down to 3.5%, foreign exchange reserves are comfortable at US$36 bn, the Rupee is more or less stable, industrial growth is pegged at 11% for February 2000 and Gross Domestic Product (GDP) growth rate is up at 6%.
Similarly the government has announced a series of liberal reforms such as:
- Liberalising foreign trade by reducing import barriers
- Hiking the FII investment limit in companies from 30% to 40%,
- Permitting private sector participation in the insurance sector
- Hiking the overseas takeover limits for technology based companies.
- Reduction in long term capital gains tax.
Similarly far reaching and sweeping reforms have been implemented in the stock markets such as - facilitating dematerialisation of shares, transparency in market operations, simplification and rationalisation of trading and settlement procedures, imposition of adequate margins to curb excessive speculation, complete computerisation of internal operations of stock exchanges, introduction of futures trading and derivatives in a limited way, cracking down on insider trading and other offences by companies and brokers by the Securities and Exchanges Board of India and speedy remedial of investor grievances.
Corporate results that have been trickling in have been highly encouraging with most companies reporting a quantum jump in revenue and earnings. In view of the above developments, Moody, the international rating agency has upgraded India’s rating from stable to positive.
India’s undisputed leadership in the information technology field has also created attractive investment opportunities in several leading software companies apart from pharmaceutical, fast moving consumer goods, media, telecom and cyclical stocks.
Indian software stocks also have shown a greater degree of resilience as opposed to the largely dot com based scrips on the NASDAQ that have recently crashed. Moreover Indian companies have also been showing profits unlike their counterparts in the US.
With more and more Indian companies getting listed on American and European bourses, excellent arbitrage opportunities and greater liquidity is available to Foreign Institutional Investors (FIIs).
The speed with which the government at the highest levels stepped in to alleviate fears about tax notices issued to some of the FIIs has further boosted their confidence. In fact most of the leading FIIs are firmly of the opinion that India is one of the brightest among the emerging markets. While several are setting up shop, the existing ones are increasing their exposures.