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Morgan Stanley moves India to the top slot in emerging markets index

Noted global emerging markets strategist Robert Pelosky of Morgan Stanley Dean Witter on Wednesday said that the Indian market has not performed well as compared to other emerging markets in Asia as funds managers grabbed the first opportunity to these markets.

Pelosky, on a two-day visit to India to understand the market situation, said in Bombay that India had been overweight at 13 per cent by Morgan Stanley exposure limit as against emerging market index at nine per cent.

Barring the UTI episode and huge fiscal deficit, the fundamentals in India are under control, within reasonable limits as compared to other markets like Taiwan and Korea. The exposer limit of Stanley in other emerging markets is in the region of one to two per cent of the index.

The company has moved India to the top slot in its global emerging markets model portfolio from the third spot . India's weightage now is 13.1 per cent, higher than South Africa (12.1 per cent) and Brazil (11.5 per cent), in the Morgan Stanley Capital International Emerging Markets Free Index that represents weightages by market capitalisation.

Investors looking at about 30 emerging markets would thus be guided by Morgan Stanley to take India seriously. Factors like downgradation of India by Standard & Poor's did not change his perception of India, he said.

He said that the recapitalisation of industries in emerging markets could only be done by the increasing risk appetite from the US investors. At present, such investors are very cautious over focusing on emerging markets where export growth rate continued to be subdued with limited scope for future.

The emerging market economies particularly in Asia and Latin America need huge flow of funds for restructuring and revamping the industrial growth and this flow may take some time more to start moving as the risk appetite from the investors of the USA and Europe is not growing. It is difficult to bring funds into emerging markets now.

In recent months, it was noticed that the US investors preferred to invest in the parent companies operating in developing markets like India through their outlets rather than investing directly in these markets and take risks, he said. Investors generally underweigh emerging markets' assets, he added.

UNI