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When market movers are index makers
There are other less positive reasons for sticking around, notably difficulties finding buyers in India's thinly traded markets. "They say this is the Hotel California of emerging economies," as one senior executive at a global bank put its. "Just like the song, you can enter, but you can't leave."
Yet there is typically an underlying long-term confidence, too, one that is rooted in basic factors: India remains a relatively poor country with plenty of room to grow; it also has favorable demographics and a potentially huge internal market.
The problem now is that, while recent market tremors seem not to have undermined this long-term faith, a sustained period of lower growth just might, which is exactly what India now faces.
(Read more: India's crisis a 'wake-up call': Stephen Roach)
The continued loyalty of foreign investors rests on faith that growth will soon return to its previously heady levels. At present this looks unlikely
HSBC recently cut its gross domestic product forecast for this financial year to only 4 percent, less than half the level three years previously. Even well-managed companies can't escape the gravity of such a sharp slowdown forever. The odds of a long-awaited upturn in corporate earnings look slim.
Meanwhile, the golden group of sectors preferred by foreign investors is growing smaller, too. Once-favored private sector bank stocks were hit by central bank measures to curb liquidity, while slower macroeconomic growth will eventually dent sales for consumer goods companies.
(Read more: Foreign investors ignore panic gripping India)
All of this only makes it more urgent that the government quickly introduces new steps to revive the economy through tax and labor market reforms among others. The continued loyalty of foreign investors rests on faith that growth will soon return to its previously heady levels. At present this looks unlikely. And the longer investors' faith is tested, the more likely it is that, come the next moment of crisis, an exodus will indeed occur.