Funds focus on Indian growth, not politics

Some funds saw the wake of Tuesday’s military coup in Pakistan, with its potential to increase tensions between the two nuclear rivals, as another buying opportunity.

"It (the coup) may have an immediate negative impact, but sometimes these things can be seen to be quite positive," said Stewart Aldcroft, Marketing and Sales Director at Templeton Franklin Investment Services Asia in Singapore.

"This might create an opportunity for buying one or two selected stocks which are considered to be good," he said.

"Inevitably what happens if there is a sell-off in the market it takes everything down with it, including the good stuff and that makes the good stuff worth buying, particularly for long-term investors," Aldcroft said.

For the big investment funds, India is typically a very small component of their overall emerging markets portfolio when compared with other Asian markets, although some now operate specific Indian funds.

Indian markets also have a tradition of trading on their own factors and are less responsive to other developments in regional Financial markets generally.

"We’re very bullish on India and have been since the beginning of this year," said Ajay Kapur, emerging markets strategist at Morgan Stanley in Hong Kong.

"It’s a pretty big overweight in our emerging markets portfolio and in our Asia Pacific model portfolio, and we would think any correction because of this panic (over the Pakistan coup) would compel us to buy more aggressively," Kapur said.

Bill Barron, spokesman at funds manager INVESCO Asia said the coup’s effect on India would be limited. "I don’t see any long-term impact on India unless things get more tumultuous — and then it will only be short-term," Barron said.

INVESCO Asia has a negligible amount of investment in Pakistan but does invest in Indian equities.

Indian investment by portfolio managers is also increasingly turning up as part of sectoral funds like Asian technology funds.

CMG First State Investments chose this week to launch its Asia Innovation & Technology Fund which includes some investment in Indian technology stocks.

"Part of the new fund will be invested in India, primarily in the technology sector, because even at this hour I think we can find good ideas," said Lim Kok Boon, fund manager at CMG First State Investment.

Lim, who also runs two small specific Indian investment funds, said he remained very positive on India.

"The formation of a stable government was imperative for the economy to move ahead and economic revival to take place…we are fully invested in mainly technology, pharmaceuticals and cyclical sectors," he said.

"Driven by better sentiment and economic revival, I don’t think we’ve seen the end of the run in the Indian market. There may be some consolidation in the near term but in the long term, we are still positive," Lim said.