Indian -OpenValue Opportunity

On January 1, 2012, the Indian government announced the opening up of its equity markets to direct investments from Qualified Foreign Investors (QFIs). As per guidelines issued by India’s finance ministry, QFIs are defined to include individuals, associations or groups resident in an eligible country outside India. India had earlier opened up it’s equity markets to Foreign Institutional Investors (FIIs) who are permitted to invest in Indian equity markets subject to caps. Over time, these limits have been relaxed and investments at higher threshold levels have been permitted in specific sectors or companies subject to approvals by India’s central bank. This latest move to attract direct inflows from QFIs into Indian equity comes in the backdrop of negative news flows and significantly higher volatility in Indian equity markets

So while the opportunity is now available for individual investors to take direct stakes in Indian companies, is this a good time to invest into Indian equity? A 20% depreciation in the exchange rate coupled with a 20% decline in the broad market index during 2010 means that Indian equities are on average 40% cheaper than they were over a year ago. Amongst BRIC economies, Indian equities have corrected most steeply in 2010. Sure, local macro-economic fundamentals look a lot shakier than they were over a year ago and there could be more bad global news in the offing. For a value investor however, current valuations for well managed front line companies look compelling and they have looked so for nearly a quarter now