The appetite for emerging markets such as India, China and others remains strong despite the recent turmoil in Asian and American markets.
A slew of funds investing in emerging markets, including India, China, Thailand and others, are being launched, the most recent one being the ABN Amro China-India Fund.
The other funds in this category include the recently concluded Kotak Global Emerging Market Fund and ICICI Prudential's Indo-Asia Equity Fund that will invest in sectors like the semi-conductor sector in Taiwan, the tourism business in Thailand, Malaysia and Singapore, the ship-building industry in Korea and infrastructure and real estate in China.
"There is a lot of appetite for the emerging market asset class in general as investors don't get caught up in the noise that is floating around in terms of your question on the US. All we do is to look at what is driving a particular stock market, economy and particular corporate sector.
"The appetite for India is still very high even though some people might say that the stock index is trading at a very high level or the risk appetite has gone down. This aspect perhaps shows that it is just the opposite," said Paritosh Thakore, head-Asian equities, ABN Amro Asset Management (Asia).
"In the last couple of weeks, markets have seen a re-assessment and repricing of risk but that doesn't mean that the story is over. There are still phenomenal traffic jams in the streets of Beijing and Mumbai and the economies are still growing.
You may end up with a minor correction in the stock markets but ultimately the focus remains on the same economic growth potential, companies delivering very strong earnings and strong return on capital regardless of what has happened in the capital markets in the last few days," he added.
ABN Amro's China-India fund will invest in property developers, construction, commodities and heavy machinery in China and energy, banking and interest rate sensitive stocks in India.
More funds are in the offing with foreign AMCs like Standard Chartered, which have filed the offer document with the Sebi. However, fund watchers feel that investors trying to seek diversification of their portfolios will go for these funds.
"While these funds afford a good opportunity for portfolio diversification, I am slightly wary if they will attract huge inflows," said Dhirendra Kumar, CEO of Value Research Online.
Though funds such as the Indo-Asia Equity fund and China-India fund are offshore investments, fund-watchers said they cannot be strictly classified as offshore funds since the money raised is from Indian investors and a large proportion of the money is directly invested in Indian equities (around 65 per cent).
"This is done to adhere to the definition of an equity fund to avail of the benefit of a lower tax can be had,"said Nilesh Shah, deputy MD and chief investment officer, ICICI Prudential Asset management Company.
Investors in a fund investing up to 65 per cent directly in to Indian equities will attract a short term capital gains tax of 10 per cent if redeemed within 1 year and will be exempt from the long term capital gains tax.
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