That India can't qualify for the FIFA World Cup-and won't in your lifetime-may actually be good news for foreign funds inflows.
India's dismal standing (rank: 117) and inability to qualify for the FIFA World Cup 2006-and, almost certainly, many more World Cups to come-may actually not be a bad thing and may actually work in favour of foreign inflows into domestic equities.
If that sounds like a bad joke, consider this: global corporate finance giant UBS (with its tongue not entirely in its cheek) has put out a research report that attempts to predict the winner of the 2006 World Cup. UBS thinks it will be Italy but more relevant to us is its finding that emerging markets (with a football culture) tend to react strongly to major football tournaments. UBS also says there is some sort of a correlation between losses at the World Cup and adverse performance of markets.
What's in all this for India? Plenty! At least 12 of the 32 teams that have qualified for the World Cup are classified as emerging markets. These include exciting markets like South Korea and Mexico, and exotic ones like Argentina. Now the fact that 31 of the 32 teams have to lose at some stage means that 31 markets are going to be subdued following a loss at some stage. Now picture this scenario: Argentina goes on to win the finals, Brazil gets dumped in the quarters, Mexico flatters to deceive (as usual), and Korea doesn't do justice to its dark horse tag. Investors start deserting these markets (either because of their inability to deliver or, as in Argentina's case, because they provide a good exit opportunity). What are the options for investors looking to reallocate assets?
Countries like India, of course, are resplendent above the vagaries of World Cup performance. So if your heart is on Brazil and your money on Dalal Street, here's a suggestion: place a wager on the men in yellow jerseys lifting the Cup, and hedge that with a fresh position in your favourite Indian stock(s).