India to attract huge global funds

India is set to attract huge amount of inflows from global pension and endowment funds as the World Bank's private equity arm International Finance Corporation on Tuesday appointed Mercer, the world's largest fund adviser, to conduct an in-depth study on the Indian corporate sector.

Mercer advises pension and endowment funds worth $3.5 trillion, and a positive report could trigger huge inflows into the Indian stock markets, said Rashmi Hansi Mehrotra, principal and business leader for investment consulting at Mercer, in an interview.  

Other markets surveyed by Mercer include Brazil, Korea and China. "We have set up an office in India and are into discussions with the Indian fund houses," she said.

To begin with, Mercer will ask the Indian mutual fund houses about their investment philosophy before getting specific about the companies' themselves.  

Pension funds such as California Public Employees Retirement System (CalPERS) and endowment funds from Harvard University are already investing part of their corpus in India through the foreign institutional investment (FII) route.   

"This is just a drop in the ocean. If the report gives high credibility to the Indian corporate sector, we could see several pension and endowment funds lining up to invest in India," said Mehrotra.

Nearly 1,300 FIIs are registered with Sebi and have invested about $63 billion. The market value of their investments is pegged at over $200 billion, making them the biggest investor group.

"This will be the first in-depth research done on Indian stocks with regard to the integration of environmental, social, and corporate governance (ESG) factors in emerging market investments," she added.

Specifically, Mercer will survey the fund managers operating in emerging markets to identify and highlight those that integrate ESG factors in their investment processes.