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Nilanjan Dey

To reduce their dependence on a single country

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Kolkata March 7 With predictions concerning a slowdown in domestic equities flying thick and fast, fund houses are reinforcing their stance that Indian investors should increasingly look at international markets with a view to reduce their dependence on a single country.

The apprehension that India may lose its pre-eminent status among all the best emerging markets, at least temporarily, is being cited as the reason that is prompting funds to drive local investors towards more overseas stocks.

General Decline

The Indian market, which has been passing through a volatile phase after the Budget, has seen a general decline in valuations in recent weeks, investment circles point out, adding that a number of sectors have been seriously impacted by the trend. The phase, some quarters feel, marks the beginning of a transitory deceleration for the market.

The case for higher international allocation becomes stronger when the need for greater geographical diversification is considered, feels Ms Ashu Suyash, who heads Fidelity MF in India. "Geographical diversification may be regarded as a key issue for investors who are aiming at optimum returns over a longer period of time," she said.

Expanding Range

A section of investors has lately started listening to such opinion, sources claim. Some of them refer to Principal Global Equity Fund, which has seen an increase in size in recent times, thanks to a decision to invest its assets in PGIF Emerging Markets Equity Fund. Incidentally, Principal Global Equity was launched in early 2004 and has posted about 11.5 per cent since inception.

Others feel the need for more options, now that the regulations concerning international investing have been revised. Mr R. Rajagopal, Head-Equities, DBS Chola MF, is of the view that such options will in future be available in greater numbers.

"Fund houses will have to expand their range of products, meeting the needs of clients who feel inclined to add an international flavour to their portfolios," he noted. The MF hopes to tap the experience of the Singapore-based DBS in managing assets in major Asian markets, he added.

Global Products

It may be mentioned here that several overseas asset management outfits are now in India, seeking to roll out their operations; this scenario too is likely to help Indian investors access global products.

A few of the existing players are already planning such offers (with partial exposure to global markets). Fidelity MF, for one, has recently lined up an offer document; the proposed Fidelity International Opportunities Fund will invest in a basket of domestic and international stocks.

Its performance will be benchmarked against a special benchmark, to be created using the BSE 200 (for 65 per cent of the portfolio) and MSCI Asia Pacific ex-Japan (for the rest 35 per cent). It may be mentioned here that Franklin Templeton MF already manages a fund that has some exposure to overseas markets.

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