MUMBAI, May 31: Foreign funds made their biggest single-day equity sales in India of 2002 this week as military tensions in the sub-continent seemed to bite, but most money managers say there is no panic — at least not yet.

The benchmark Bombay index has lost over nine per cent and more than $6 billion in market capitalization has been wiped out in the past two weeks, but foreign funds with $15 billion invested in Indian assets have sold only $56.5 million.

After holding out for more than a week the funds dumped a net $26.6 million on Wednesday, after $21.1 million the previous day, data showed.

“We are not pulling out in panic, but we are cautious,” said Hemant Kulkarni, who manages some $80 million in Indian assets for Bahrain-based Taib Bank.

“There is no clue as to what will happen next, but if indeed a war does break out, then all bets are off,” said Peter Hames, Singapore-based fund manager at Aberdeen Asset Management.

Analysts said the investment strategy of foreign funds may help restrain damage.

“Since there is a bottom-up approach to investing in India the impact has been limited,” said a Singapore-based research director of a US fund.

Foreign funds have traditionally bought Indian assets on the basis of their individual merit rather on a sectoral basis or guided by macroeconomic factors.

While fears of war have not ebbed, many believe the stakes are too high for a full-fledged confrontation.

“Valuation-wise it is a very attractive market, we have no arguments with that,” said Tan Choon Hoe, Singapore-based fund manager with AIB Govett (Asia) Ltd.

“But in the event of a war, corporate earnings will take a beating,” he said.

The price-earnings multiple of the Bombay index fell to 15.38 on Thursday from 16.86 on May 13 and compared with April’s average of 16.83.

In a survey of fund managers released earlier this week, Merrill Lynch said that nearly a third of those polled felt the market was undervalued by more than 25 per cent.

That is sharply up from a survey last month which showed only one out of eight respondents thought it was undervalued by a quarter.—Reuters