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Nervous laughter

Two things stand out as common ground: a firm belief in the long-term prospect of the Indian market and quite a bit of edginess about the immediate future, writes Udayan Mukherjee.

business Updated: Jun 29, 2007 02:30 IST

It has been a range-bound week for the market while I have been catching up with scores of global investors in London. It has been quite an interesting experience sharing the perspectives of different classes of investors--general emerging market funds, India dedicated funds, absolute return funds, hedge funds and private equity players--at the Euromoney India investment forum. Two things stand out as common ground: a firm belief in the long-term prospect of the Indian market and quite a bit of edginess about the immediate future. The first one you have heard before, it is the second bit that I found quite interesting.



With most markets around new peaks, that too in a fairly low volatility zone, you may have expected to see at least a quiet confidence, if not table thumping bullishness. What you see instead is an uneasy calm. Yes, a lot of new money has been put to work in recent weeks in emerging markets, including India, but that may be out of necessity. More money has flown into funds and a call to remain in cash would have turned out to be very expensive in a backdrop of rising stock prices. Most global fund houses tend to move in herds, at least on big calls. So, while many may fear an imminent correction, they will still stick to what the peer group is doing rather than risk relative underperformance. If you ask them would they put their own money in these markets now, I wonder how many would jump at it.



There is, truly, a certain air of disbelief over the length this global equity party has lasted, without a meaningful breather. That is a good and a bad thing. Good, because there is no apparent euphoria or complacence, even though the money continues to flow. Bad, as you sometimes wonder whether there is some foundation to that lurking fear underneath. As one fund manager put it, India is a great story, if somewhat expensive, but right now the call has to be global, not so much country specific. India's own demons of interest rates and slowing earnings growth may cap upsides but not trigger a large sell-off, but if something goes wrong globally then there could be blood on the screen. No one is quite sure of anything. Which is why the conference reminded one of a gathering of nervous school children waiting for their annual report cards.



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The writer is Executive Editor, CNBC-TV 18