Eyes On The Prize; Fund managers are gaga over the huge, tech-savvy market.(Cover Story)

Byline: Sudip Mazumdar

Kiran mazumdar-Shaw, CEO of the Indian biotech firm Biocon, starts her day with a quiet prayer. On an April morning this year, her appeals for grace and good fortune were apparently answered: Biocon's initial public offering was a smashing success. The company's stock opened on the Indian bourse at a price of $7.32 a share--and three days later was trading at $16. That made the Bangalore-based Biocon, a leader in making statins (cholesterol-reducing agents), a billion-dollar company. The IPO also made Mazumdar-Shaw the richest woman in India, with company stock worth $450 million. Sixty percent of the shares were offered to, and quickly snatched up by, foreign institutional investors. "I knew we were doing very well," says Mazumdar-Shaw. "But we're a little surprised by the enthusiasm of investors."

She shouldn't be. Foreign fund managers have been gaga over India for quite some time, actually. The California Public Employees' Retirement System, or CalPERS--the $165 billion U.S. pension fund that puts a premium on corporate-governance practices--decided in April to start investing in Indian companies. Where CalPERS goes, other international investors tend to follow. Last year alone, more than $7.5 billion was pumped in, the highest in any year since the country opened to foreign capital in 1993. According to a United Nations Conference on Trade and Development study, major foreign direct investment is expected over the next few years in the country's industrial sector--automobile manufacturing, machinery, chemicals and, to a lesser extent, electronics.

The bullish attitude can ...