Jardine Fleming Earmarks $500 M For India

Hong Kong-based leading investment and merchant banker Jardine Fleming plans to invest $500 million in India, over a period of two years.

It is also planning to expand its Indian operations to enter the derivatives market. It also plans to step up its investments in the venture capital funds in a big way.

Group chairman and managing director of Jardine Fleming, Henry Strutt said the investment bank has decided to retain its `overweight' rating for India in the current year, because the macroeconomic fundamentals here are strong. He considered the current market downturn in India, "a buying opportunity".

Jardine Fleming recently downgraded Pakistan to "neutral", as a combination of "economic sanctions and domestic politics drove the market down."

 

According to the investment bank's India Strategy paper, by the end of May this year, India represented the fourth largest constituent of the bank's MSCI Asia ex-Japan free index, as against last year, when it was ranked seventh, with a weight of 5.4 per cent against the current 9.8 per cent.

Strutt said the increase in benchmark weight for India was mainly because of the deepening of the Asian crisis which forced many regional fund managers, who could earlier afford to ignore the country, pay a lot more attention to it.

He said political uncertainties, coupled with `some problem areas in government policies and technical regulations' could act as a negative factor for FII investments in India in the short-run. The recent happenings in Russia could also cast a shadow over the Indian market, in the short-term, he said.

He said the bottom-up opportunities in India were plentiful, adding that this year's budget created some very attractive stock-specific opportunities.

One of the reasons why the investment bank is bullish on India is that many of the Indian corporates are now in a `restructuring' phase with focus on profitability. It feels when market conditions improve, the impact of these changes will be significant. The combination of higher profitability and re-rating should result in strong share price performance, Strutt said.

However, he said Jardine Fleming was negative on commodity and domestic cycle companies, it was quite bullish on the telecom and IT sector companies. "We are also quite positive about some of the consumer goods and pharma companies," he said.