First, apologies for not posting last month, I started interning with super awesome VC firm and was busy settling in Mumbai. I will try to make an effort to keep up to my target of at least one post every month. This blog is my first one about macroeconomic views about flow of capital and investments in global markets.
India has seen a deluge of foreign capital inflows in this year, more so after the clear electoral mandate in May 2014. While improved domestic condition is the major reason, changed dynamics in the global geo-political and economic conditions have also resulted in the increased deluge of capital.
A look around the globe and we see unrest in other emerging economies and regions, Turkey, Thailand and Middle East. This is making these regions a no-go for fresh investments. The money pushed out of these regions must go somewhere else and India with a stable geo-political environment for investment, pro-entrepreneurship government and buzzing entrepreneurial environment is providing the confidence to investors.
Russia could become uninvestible by sanctions. Russian investors want to play it safe during sanctions. This has led Russian banks to move their investments to friendly countries like India and lending to Indian entrepreneurs like the debt of $1.5bn to the Ruias of Essar and the venture investments made by the mail.ru group in Indian startups.
Brazil’s economy contracted in the last quarter and China’s clocked growth in lower single digits. Economic recovery in Europe has been slow nudging the ECB to a rate cut, which has led to lower borrowing costs in the EU. The long term impact of this would stimulate the European domestic economy, but it would also flush the system with more and cheaper funds. At least some parts of these funds will invigorate euro-funded carry trades, where investors will borrow at low rates to buy high yielding assets in emerging countries like India. Expect the party in the Indian the public equity, debts and private equity/venture markets to continue for some more time.