The Morgan Stanley Capital International (MSCI) India index has bounced back, providing the first positive returns since April 1, 2004.

This has resulted in a renewal of interest among foreign institutional investors towards India.

The MSCI India index is the benchmark index used by most of the FIIs for their local investment strategies.

Among the emerging markets, the Philippines outperformed all other markets on a year-to-date basis, followed by Singapore and Hong Kong.

However, Korea has turned sharply negative since April, after fetching positive returns in the earlier months of the year.

On a year-to-date basis, the MSCI India index is still negative. It is, in fact, the worst performer among the emerging markets, followed by China, Pakistan, and Taiwan.

Rationalising the negative returns on a year-to-date basis, a senior research analysts with a foreign broking firm said: "The MSCI India index has shown negative returns because the base figure was high, with the Sensex trading at around 6200 in January this year.

But things have changed after the elections, and returns have turned positive. The markets are, therefore, seeing fresh inflows from FIIs."

Andrew Holland, chief administrative officer and executive vice president-research, DSP Merrill Lynch, said, "Markets such as India have come of age resulting in renewed interest among the FII community. With more funds expected to flow into the emerging markets, India is definitely going to benefit in terms of fresh inflows."

Amitabh Chakraborthy,  head of research, private client group, Kotak Securities, said, "While there are apprehensions about the FII interest to continue for

Indian equities, the strong performance of the MSCI India index in the last few months will ensure  that money flows out of markets which have already peaked to those which are performing better."

An equity strategist with a leading FII from Hong Kong said the MSCI India index had performed relatively poorly in the first three months of 2004, but a lot has changed after the general elections in India.

"At current levels, India is neither expensive nor cheap, which is in contrast to other Asian markets. However, strong inflows into the emerging market are expected to benefit India as well, as the forward

earnings of India Inc are expected to be robust for next year."