The markets seem to have made a habit of scaling new peaks. After flirting with 11 K last week and then flattering to deceive, on Monday, the Sensex scaled Peak 11K firmly, with market players betting on even better days ahead. The volumes on the exchanges soared too, with the National Stock Exchange turnover scaling its own new peak of Rs 11,000 crore turnover in the cash segment.

So, there?s celebration all around. The Budget has been generally welcomed as one which didn?t attempt to tinker needlessly with an economy which is growing. The finance minister has also removed his finger from the pause button as far as fiscal consolidation is concerned. Broadly, it?s a picture of a market and an economy which holds promise for the future.

Recently, I had occasion to have a long discussion on the state of the economy and the markets with the full board of trustees of a frontline foreign fund, which manages a sizeable ?68 billion worth of assets. While the aim of the discussion was for them to understand what was going on in the Indian economy and the markets, it provided me some vital clues as to what the chief concerns continue to be for foreign institutional investors (FIIs). This, despite the fact that in 2005, these FIIs pumped in over $10 billion into the Indian markets and the same tempo is being maintained even in this calendar year, with $3.5 billion already crossed so far.

The trustees?who have experience in managing money in several countries, both in the emerging markets and outside?were clearly bullish on the Indian markets. But several questions remained unanswered on both the state of the markets and on economic policymaking. It was clear that while the overall ?India Story? was the one they wanted to believe in, they were scared of the pitfalls.

The biggest concern for FIIs continues to be the slow progress on infrastructure. ?We?ve just been to China and the difference is quite amazing,? said one of the trustees. The discussion followed on how infrastructure was, indeed, perceived to be the single most key roadblock to further growth, even by top Indian industrialists.

Some samples: was the government of the day serious on pushing through major infrastructure projects? What about airports? What about illegal settlements? How is the government going to address these multiple layers of problems? The common thread was the obvious faith the foreign investor had in a large part of the political leadership, more so in the key economic ministers and even in institutions like the Planning Commission.

• Poor infrastructure remains an over-riding concern for FIIs
• And they fear the Left?s stance on airports privatisation may slow reforms
• But there?s optimism too, with many Indian cos tipped to be global winners

But the spectre of the Left continues to haunt them as well. Would the Left ever seriously derail economic reform of the type the government wanted to push through? Was its intent not visible in the manner in which airport privatisation was opposed? How would the government tackle this political reality? The discussion inevitably veered to the West Bengal model of economic reform, reformist chief minister Buddhadeb Bhattacharjee and how it was the same party supporting the government at the Centre.

Other issues which seem to be top of mind for FIIs were corruption and the extent to which state governments would come forward on economic reform. The competition between state governments to attract foreign investments also figured. The active part played by the judiciary in some cases was also something seen as a positive. Major pluses: the state of the Indian financial sector and regulation of banks and markets, the manner in which some major PSUs, like NTPC, have fared at the markets after their listing, clearly indicating the direct connection between shareholder accountability and good corporate governance. At the back of the mind of the foreign investor also seems to lurk a fear of the extreme right coming back into the limelight at some point, derailing the economic reform agenda.

Our discussion also took us into whether there are enough Indian companies which could become leaders of India Inc tomorrow. Not just the Tatas, the Ambanis and the Birlas, but other lesser-known corporations waiting in the wings. The agreement was that there were clearly enough leaders, in diverse sectors like auto components, textiles and pharmaceuticals. Companies, which would become players of global scale tomorrow. And that?s a crucial factor for any investor.

At the end, it was clear that concerns do remain. But, for now, FII fears and apprehensions have been pushed to the backburner by the euphoria of a rising Sensex and an economy growing at 8% yearly.