The Cynicism Is Growing

THE cynics were proved right about investing under the present government. Worse, fund managers were beginning to suggest in London last week that cynicism could prevail over investing under any future government. "We do not see a stable government doing a full term in the immediate future," said a manager with a global American fund. And that seemed the dominant sentiment on the future of investments in India.

Foreign institution investors (FIIs) had in any case been showing little interest in fresh investments in India in recent months. But the budget, widely appreciated by London managers who handle investments in India, and the successful VSNL issue last month, had began to restore some confidence in the Indian market. Congress President Sitaram Kesri stamped on that confidence just as it was beginning to grow.

"It looks pretty grim," said S. Gulmohammed from English Trust that manages money from a range of sources in the  Mumbai market. "The budget was good but it was only one arm," he said. "Now it may or may not go through, but either way, this stop-go policy will not help anyone, especially not foreign investors."

 Fund managers were holding back tightly in the face of a volatile market that dropped points and picked them up in hundreds over days. The Mumbai market now spells speculation, it does not invite investment, according to them.

Managers did not seem prepared to talk about these setbacks as blips any more. "A setback like this is going to inhibit our interest in our future in India," the manager with the US-based fund said. "Sure, India is a place with great opportunities but the government must get its act right and be stable." Among the first casualties of this new despair about the Indian market is likely to be any further privatisation offers by publicly owned companies. The VSNL offer just about survived Kesri, the next one may not be so lucky, investment managers here say. "Those among us who bought VSNL shares will just hold on and see, but no one is going to make a grab for the next stock on offer," one investment manager said. Any drop in the price of VSNL stock will be carefully watched. The greatest offer could become the strongest warning.

The yo-yo prices of stocks also seem to have curbed any enthusiasm for GDR issues. "We would only keep a very small part of our monies for possible quick gains on the market," said a British consultant to a fund. "Any investor would commit larger amounts only to what they foresee as steady growth areas." Kesri, unheard of till he started off this crisis, has now made an appearance in the London papers. He looked a bit like the old India that managers seemed anxious to see left behind.