India has emerged as one of the most attractive investment destinations in the world.

Merchant bankers and analysts feel this trend is likely to continue. According to the Morgan Stanley Capital International (MSCI) Equity Indices, which compares the returns from various markets, India has given the second highest annual return at 38.36% among the BRIC (Brazil, Russia, India and China) countries in the last five years.
The best return was given by Brazil at 46.19%. This means that an investment of Rs 1 lakh in the Indian market would have become Rs 5.07 lakh in the past five years and Rs 6.68 lakh in Brazil. The Chinese market, which is the largest emerging market in the world, gave an annual return of 31.36% and Russia 33.32% in the last 5 years. But when it translates into actual gain the difference is huge.

An investment of Rs 1 lakh in China would have become Rs 3.91 lakh and in Russia Rs 4.21 lakh. But the annual returns in the developed countries like US and Japan is low at 9.29% and 11.27% respectively. That means, an investment of Rs 1 lakh would have become only Rs 1.56 lakh and Rs 1.71 lakh respectively. Similarly in the last three years and one year, the Indian stock market has given handsome return in the region of around 50% compounded annually. Against this, developed countries like US gave returns of 11% and 20% while Japan 13% and 9% respectively.

Low returns from developed stock markets made investments from there flow towards emerging markets. In this, India provided huge opportunities to foreign investors, resulting in large funds flow. Upto June 28 this year, according to SBI Cap, India received FII investment to the tune of $4.27 billion, which is the second highest in the Asian market. Taiwan received $7.47 billion during the period.

The main reasons behind Indian markets attracting investors are its strong fundamentals and the good returns earned by companies. ICICI Securities senior vice president Ravi Sardana said the market was attracting huge investments because of high returns. On top of this, appreciation in rupee has further increased the return in dollar term in the last six months. With returns from the Indian stock market going up to over 57% in the last one year, foreign investors are rushing to cash in on it. India has become a must in almost all foreign investors’ portfolio, leading to huge liquidity in the market.

Source: TOI
Date: 07-07-07
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