India and China will again emerge as the preferred destinations for foreign investors, the research arm of global rating agency Moody's said on Wednesday.
"Investment opportunities in China and India will soon be in hot demand again. The two emerging giants had remained appealing to international investors even during the gloomiest phase of the global downturn," Sherman Chan, an economist with Moody's Economy.com said.
"India is expected to record gradual recovery in FDI (foreign direct investment) inflows in coming months, especially since the Indian authorities are keen to promote public-private partnerships in supporting growth initiatives," Chan said.
"Although India has yet to see a notable pickup in FDI inflows, net capital inflows in the stock market have been rising at a solid pace, which is also a clear sign of improvement in investor appetite," she said.
According to Moody's Economy.com, the recent stabilisation in corporate conditions may have also revived investment flows into China and India.
"Businesses that had to sit tight because of liquidity concerns or risk aversion are likely back in the game now," Chan said.
"Speculation that some economies have already bottomed out, or have their trough in sight, has likely also encouraged bargain hunting for investment opportunities now."
Noting that the return of foreign capital inflows would likely help the two economies in the accumulation of foreign reserves. "However, pressures on currency appreciation should also grow," Chan added.
She predicted that the Indian rupee is expected to gradually regain strength in coming months, having nosedived last year amid rapid repatriation of funds by foreign investors.