Indian equity markets in recent weeks, which have been beat-down to almost a 4 digit index , are set to see a welcome respite with the Norway's pension wealth fund, Global, planning to invest $2 billion (about Rs9,772 crore) in Indian stocks over the next three months till January, providing a much-needed boost to the stock markets that have been pulled down by the flight of FII investments.

The move by the fund also reflects a confidence in the fundamentals of the Indian economy by the oil-flush Scandinavian nation.

The recent global financial turmoil has resulted in poor returns on Global's equity portfolio, even as Norway's net inflow from petroleum exports has been higher than expected, forcing the fund to seek beter returns from relatively safer emerging markets.

This renewal of interest from the sovereign funds could provide much-needed capital for the Indian markets.

This has come about with Global increasing India's weightage in its investment portfolio. According to deputy secretary general in the Norwegian finance ministry, Thorvald Moe, India's weightage  in its overall portfolio was recently raised from 0.2 per cent to 0.94 per cent, which will enable funds of around $2 billion to flow into India stock markets by the end of this year.

India and China, with close to 1 per cent weightage, are among the leading emerging markets in the SWF's portfolio, said Moe who is in charge of Norway's pension funds.

Global has already invested about 1.8 billion Norwegian kroner ($270 million) in Indian markets. Norwegian Moe told senior indian finance ministry officials, "we are not bothered about the stock markets coming down."

Indian stock markets have witnessed a sharp fall since the global financial crisis started with the news about the bankruptcy of Lehman Brothers and the Sensex has fallen by around 51 per cent to 10217 levels as of 21 October 2008.

The net equity investment by FIIs was approximately $7.8 billion during the period from 17 August 2007 to 31 December 2007. The FII net disinvestment in equities since January 2008 has been to the tune of nearly $11 billion.

With a corpus of about $350 billion, Global is said to be the third largest fund in the world, which is constantly replenished by the country's petroleum revenues. It invests 35 per cent in fixed income, 60 per cent of its corpus in equity and the balance in real estate.

The Government Pension Fund, under the Norwegian finance ministry, was established in 2006 and has of two parts, "The Government Pension Fund - Global", which is the country's Petroleum Fund, and "The Government Pension Fund - Norway", which was previously known as the National Insurance Scheme Fund. The operational management of Global is carried out by Norges Bank, which invests the fund's capital in bonds and equities outside of Norway.

Sovereign wealth funds have existed since the 1950s and have increased in size in the past decade, and about two-thirds of the nearly 40 sovereign funds in existence were founded in the past 10 years, according to the International Monetary Fund.

These funds control about $2.5 trillion in assets, a figure the IMF estimates could reach $11 trillion by 2013. Asian countries such as China and Singapore use the money to invest their trade surplus while oil-exporting states have set up funds to invest their petroleum revenue.

The SWF funds are usually long-term investors, unconcerned at the fall in the value of their stakes held with companies globally as they can ride out the short-term financial crises with their long-term investment strategy. This makes it easier for them to take on new investments despite the risks of the ailing financial sector.

Earlier this year, many countries were reluctant to allow sovereign funds to make large investments as these funds were presumed be able to exert economic and political leverage in the countries they invest. Now, ironically, the tables have turned with many government spending billions to bail their financial institutions, welcoming additional capital infusion, even from SWFs.

In August a high-level coordination committee on financial markets said that the Reserve Bank of India and the Securities & Exchange Board of India would have to take an interest in SWFs in view of the critical role they played in the global economy and calming sentiments during the ongoing crisis in the financial markets.

At this year's World Economic Forum (WEF) summit in Davos, it was estimated that SWF with their overwhelming $8 trillion-plus in wealth are expected to grow to over $20 trillion over the next five years, making these funds even more powerful investors  globally.