MUMBAI: When the Indian stock market first caught the Japanese investors’ fancy, analysts said the flow of Japanese money meant the end of the bull run. Conventional wisdom has it that Japanese money enters an international market at its peak and heralds the beginning of the end.
It has been two years since then, but the party at the market is still on. The Japanese have made more money than they expected and investor interest is growing. Several India dedicated funds, including the Merrill Lynch India Fund and PCA India Infrastructure Equity Fund, have done well and Indian companies, including Infosys, have successfully raised money in Japan.
“India is a special country in Japan, right now,” said Michiharu Osamura, chief representative, of Mitsubishi UFJ Securities Co. Ltd, which opened its India representative office on Wednesday. “Earlier the Japanese focused on investing in China. But with the BRICs report indicating India would be among the fastest growing global economies, the next wave is India,” he said.
Daiwa SMBC Co. Ltd, a large Japanese brokerage house, also opened India representative offices recently and concluded a debt bond, called a Samurai Bond sucessfully. “Since the Japanese came into the market, people said the market would go down. But we have proved the world wrong by making money here,” said Vaishali Nigam Sinha, India head, investment banking, at Daiwa Securities.
Now, both Daiwa and Mitsubishi are looking at doing more than just raising India-dedicated funds. They want to help Indian companies raise funds in Japan, where interest rates are low and while Indian interest rates keep up their steady upward climb.
“Many Indian blue-chip companies are looking at raising money abroad and Japan is an attractive country to do that in,” says Mitsubishi’s Osamura. They also want to do a second India infrastructure fund and help corporate India raise finances for mergers and acquisitions in Japan.
In a recent media interview, Tomokazu Seo of Nomura Securities, another Japanese fund house, has said the global appetite for risk is selective but positive for India.
According to him, Indian valuations are expensive but India “has become a crown jewel as a global emerging market” and “quality assets are always expensive”.
So far, most funds have been broad-based country funds, but there is growing interest in specific India sectors. Besides infrastucture, Japanese investors are also interested in India’s banking, telecom and technology stocks.