We won't see Sensex at 8,000 again if...


Where is the Indian stock market headed? Where is the global economy headed?


US$176 bn California Public Employees' Retirement System, popularly known as CALPERS is one of the largest pension funds in the world. When the global equity markets cracked in 2008, the fund lost 27% of its value. However, with the long term outlook that it has, CALPERS continued to focus on long term returns in the US and emerging markets. It is this kind of long term money –save some innovative streaks - that has differentiated developed financial markets from the emerging ones.

Investors like Mark Mobius believe that emerging markets is the place to be in the next decade. And India needs to lure long term funds. With one of the highest domestic savings and investment rate, the country places itself very comfortably in terms of economic resilience. However, data from the RBI show that most investments had been going to short term instruments like FDs in the past decade. Mutual funds have only recently found favour. FIIs have been the fair-weather friends and have been quite caustic at times.

It is thus imperative for Indian government to realise that conducive investment policies are key to drawing such funds. More importantly, good disclosures and corporate governance will set the stage for Indian stocks to find an allocation in pension funds. Given their nature and volume, a successful entry of pension funds into India markets may ensure that the Sensex never touches 8,000 levels again