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Confidence in India dipping, shows global venture capital survey

Confidence in India dipping, shows global venture capital survey

The just-released 2013 Global Venture Capital Confidence Survey, shows a 7 per cent drop in the sentiment of US based private equity and venture capital funds towards India as compared to 2012.

PHOTO: Reuters PHOTO: Reuters
Global investor confidence in the Indian economy is dipping. The just-released 2013 Global Venture Capital Confidence Survey, shows a 7 per cent drop in the sentiment of US based private equity and venture capital (PE-VC) funds towards India as compared to 2012.  

US-based funds are among the biggest investors in India, which makes this a worrying trend.

Among other regions, the confidence of UK-based funds has fallen by a whopping 18 per cent compared with last year, those from  Australia by 6 per cent compared to last year and Japanese funds by 4 per cent.

Overall global confidence among PE/VC funds has fallen only 2 per cent compared to last year, but taking comfort from that would be shortsighted.

Confidence among funds remains the same or has actually risen in some countries - by 21 per cent in Canada, say, or 20 per cent in Germany. But Canadian or German PE/VC funds have little exposure to India, so their confidence or otherwise is of little consequence.

The survey was conducted by Deloitte & Touche LLP and the National Venture Capital Association during May-June 2013. They queried 403 General Partners (fund managers) across the globe with assets under management ranging from less than $50 million to more than $10 billion.

"There is a stony silence creeping in, " says Rajiv Sundar, Senior Director, Deloitte in India. "The current inflationary trend, instability and the depreciating rupee are not making things easier for investors." The predominant sentiment, he said, is "wait and watch."

He also noted that the rupee had started its downward slide when the survey was conducted. "In a sense the findings mirror the way the economy is going," he adds.  

However, the survey also highlighted that Indian funds showed slightly increased confidence, up by 4 per cent compared to last year. "A home bias is very evident across the world, with investors remaining more confident of their own economies than in foreign economies." Says Sundar.  

Mahendra Swarup President of IVCA points out that this has to do with valuations getting more realistic and Indian fund managers taking a long-term view of investments.