India: 'safe haven' from crisis

DESPITE the fact that India faces a general election in mid-February, stock markets there have suffered almost no fall-out from the Asian financial crisis. Indonesian and Thai shares have lost 80 per cent of their value in dollar terms since September, but Indian shares have risen 10 per cent.

"India has been something of a safe haven," said a London-based fund manager handling pounds 300m in Asian equities. "The Indian rupee has performed incredibly well in terms of holding its value against the dollar."

MK Khanna, chief executive of UTI Securities in Mumbai, explained why India has been insulated so far: "The Indian rupee is not yet fully convertible, which helps explain why it has not seen major speculative activity. It is also worth noting that, fundamentally speaking, the Indian economy has not been dependent on exports for growth, and Indian companies, which enjoy access to a large domestic capital market, are generally not as highly geared as companies in the rest of Asia."

In the final lap of the electoral campaign, however, the Indian market could become vulnerable. The ruling coalition is seen by most commentators as unlikely to be returned to power.

Meanwhile, finance minister Chindambaram is viewed by international investors as a pro-liberalisation policy-setter. The last budget, passed in mid- 1997, cut taxes, removed various subsidies, and increased the ceiling for foreign ownership in Indian-listed companies. It was widely applauded as reforming.

But the opposition Bhartiya Janata Party, a right-wing nationalistic grouping, is now playing politics with the Asian financial crisis issue. BJP politicians have recently again referred to the damage to India that can be caused by "open" capital markets.

BJP president LK Advani was quoted last week as saying he was suspicious of "short-term oriented" international fund managers. The campaign manifesto committee of the BJP has discussed plans to introduce a "lock-in" period of six months for portfolio investments.

The Indian stock market is relatively small, by developed market standards, but it is one of the larger emerging markets. It is capitalised at $130bn (pounds 76.5bn) compared with $17bn for Indonesia. International investors have approximately $10.5bn invested in Bombay, with another $8.5bn invested in Indian global depositary receipts traded in London.

To date, international investors have discounted the BJP anti-globalisation rhetoric as pre-election breast-beating. The Indian rupee strengthened last week from Rps40.25 to the dollar to Rps38.3 to the dollar, while the Bombay stock market index has been steady at around 3,350.

But this could change if the BJP threat is seen as becoming part of a serious manifesto that includes curbs on international investors, and at the same time, the BJP appears headed for victory in the polls.

Most opinion in India points to another coalition government, with the BJP as the largest single party. The elections will be held from 16 February, and results are unlikely to be finally known in this mammoth democratic exercise until the first week of March.

q Gianluca Ricardo is the pseudonym of a City financial executive.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot