No one would have predicted that the largest float on the Alternative Investment Market (Aim) this year would be an Indian investment fund, but this week history was made and KSK Emerging India Energy Fund floated on Aim raising $200m (£101.2m) showing the rest of the world that India's growth remains very much on track. In fact, officials have recently announced growth forecasts of 8-8.5 per cent for India's economy in the 2008-09 financial year – which, although less than last year's astronomical 9.4 per cent growth, is still pretty spectacular considering that the rest of the world has gone into economic slowdown.
The Bombay Stock Exchange's Sensitive Index (BSE Sensex) – a value-weighted index consisting of India's 30 most actively traded stocks – has been increasing at an almost equally rapid pace. The Sensex has risen steadily over the past two years, hitting 14652.09 points last summer and powering on to hit 20873.33 points by January 2008.However, reverberations from the global financial crisis sent the Sensex down to 16748.2 points by the end of January 2008. The index has since fallen to lows of 14808 points, but has been showing encouraging signs of recovery.
The Alternative Investment Market (Aim) All-Share Index has also suffered significantly, falling to a year low of 939.5 points on 20 March 2008. But one index has bucked the trend and remained resilient in spite of the performance of both Sensex and the Aim All-Share: the ic Aim India Index. In March 2007, following a steady inflow of Indian companies on to Aim, we created the ic Aim India Index. Since then, the index has grown to include another five companies, taking the total to 26 companies that have Indian-operations, or are based in India. So why have Indian companies on Aim had a stronger run than both their India-listed counterparts and UK companies on Aim?
First, it's because India's growth story is still being written. And young, high-growth businesses offer defensive qualities as they are not in tandem with the global economy at large.
India's common law system is based on UK common law, making it easy to understand. Corporate governance is advanced and accounting standards do not vary across the country as they do in China.
Sam Tully, corporate banking director at Seymour Pierce – which has also established an India Index – says that there is also a growing understanding by Indian companies of the kind of reporting expected of companies on Aim. So while the Sensex undergoes its period of correction, and Aim shares go through a period of consolidation, investors have an opportunity to ride the high-growth company and India waves by investing in companies on the ic Aim India index.
