Kotak plans a $250 million offshore fund

Kotak plans a $250 million offshore fund

Mumbai: Private sector Kotak Mahindra Bank Ltd’s international asset management arm is planning a $250 million (Rs1,182.5 crore ) fund in early 2009 to invest in Indian stocks, a top executive said on Thursday.

“You are really getting stocks cheap, which, if you can hold for five years, investors should make great returns," said Paul Parambi, head of international business for Kotak Mahindra.

After sliding more than half this year as cash-strapped foreign funds pulled out more than $13 billion, the benchmark index, the Sensex, trades at a 12-month forward price to earnings multiple of about 10 times, well off 20 times at the start of the year.

The Sensex has gained 30% since hitting a three-year low in October, with foreign funds ploughing in nearly $445 million so far this month.

Parambi said he expected the market would rise by about one-third in 2009 as investment flows improve in the second half on lower inflation and commodity prices. “We plan to have the first close in the next three months," he said, adding that the fund would invest in shares of 15-20 medium-sized and small firms across sectors.

Parambi said the market could be choppy as companies faced a tough December quarter and slower growth next year, but earnings could bounce back after 2009-10.

India’s economy, Asia’s third largest, is largely driven by domestic demand and less dependent on exports. This should draw in funds as the US, Europe and Japan grapple with recession.

Parambi, who has been with Kotak for nearly two decades, said a stable financial system, cracking commodity prices and lower valuations would make India a preferred destination for foreign investors.