That "the darkest hour of all is the hour before the dawn" is an old Irish saying, meant to inspire hope under adverse circumstances.
The proverb fits the trajectory of Indian markets and foreigner investors' attitude towards the country over the past year.
Around a year ago, when the rupee began to depreciate in May 2013 amidst poor macroeconomic fundamentals and monetary tapering by the US Federal Reserve, it seemed that India had lost the economic plot and risked becoming an untouchable among emerging market (EM) peers.
Fast forward to 2014 and the gloom and doom scenarios of 2013 seem a distant memory.
The rupee is up nearly 10 per cent from the lows of October 2013 and foreigners are queuing to grab a bigger pie of the India growth story.
Foreign institutional investors have pumped nearly $5 billion in Indian equity market since the beginning of the year, on top of the $24.5 billion invested in the 2013 calendar year.
In comparison, until the first week of the new quarter (January-March, 2014) EMs collectively had 22 weeks of consecutive outflows from EM funds, according to data from funds tracking agency EPFR.
According to various estimates, India has absorbed nearly 60 per cent of all equity inflows into EMs in the current year so far.
MNCs meanwhile continue to scale-up their presence in India, either through projects or mergers & acquisitions.
Experts are not surprised. "Unlike domestic investors, MNCs were always convinced about the medium and long-term growth prospects of the Indian economy. Their faith has been reinforced by recent improvement in macroeconomic indicators and they are positioning themselves to make the most of the next wave of growth in India," says U R Bhat, managing director Dalton Capital Advisors.
For others, emerging markets are now a value buy, given the valuation differential with the developed markets. "All the talk of an emerging market crisis has continued to open up the valuation differential in favour of the former. We see EMs as cheap in absolute terms relative to both itself and against developed markets," writes Markus Rosgen of Citi Group.
The optimism is visible in macroeconomic indicators. India's current account deficit (CAD) more than halved to two per cent of gross domestic product in the 2013 calendar year from a record high of 4.7 per cent in the previous year, according to figures by International Monetary Fund (IMF).
In comparison, countries such as Turkey, Brazil and South Africa continue to struggle with high CAD putting their currencies and sovereign ratings under pressure (see table below).
The difference has been the way the Indian economy and business reacted to currency depreciation. India's merchandise exports grew 5.3 per cent (in dollar terms) in 2013 against two per cent decline in the previous year.
Exports including IT services did even better. For example, Tata Consultancy Services revenues were up 16.2 per cent year-on-year in dollar terms in FY14, while Infosys' revenue growth was 11.2 per cent.
Import decline was partly due to higher import duty and curbs on gold imports but anecdotal evidence suggests companies and consumers substituting expensive imports with relatively cheaper domestic alternatives.
The adjustment is taking much longer in other EMs. For example Brazil, Indonesia, South Africa and Turkey reported a higher CAD in 2013 than the previous year.
The main reason has been their import stickiness and slow moving exports. In all the four countries, imports grew faster (or fell less than) exports in 2013, despite double-digit currency depreciation (see chart on currencies).
"Investors should be very selective about countries, focusing on those that have reduced external vulnerabilities by addressing current account deficits, growth has stabilized and political and policy reform is high on the agenda. We continue to like Indonesia and India on these metrics (though both are obviously now more expensive) where all three components of GDP growth - consumption, investments and net exports set to improve in the short term," says Nick Paulson, head emerging markets, at Espirito Santo Investment Bank.
Then there is the "Modi rally" with investors expecting the BJP-led alliance to form the next government which they believe will be more market and business friendly.
"Inflows from NRIs have increased significantly in last few months in the expectation of faster growth and currency appreciation post elections," says Rajesh Saluja, CEO and MD, ASK Wealth Advisors.
Everyone, however, is not buying the turnaround story. With public debt to GDP ratio of around 67 per cent in 2013, India is one of the most indebted countries among its peers. So is the case with consumer inflation in India.
"Don't bet on a quick recovery as yet. The moment the next government removes restrictions on gold imports, ratios will reverse and you could see large outflows," says the CFO of a leading company.