I am surprised that so many mutual funds know so much about the industry they work in and have enough good relationships with the companies' management to give them accurate information about their financing and profit numbers, not to mention where their industry is heading, what their competition is doing and what are the risks they are facing. The research reports I see are really good to read and understand too. But why is it that such informed fund managers not able to produce an alpha (Alpha is a risk-adjusted measure of the so-called active return on an investment. In short, the higher the Alpha, the better the fund managers stock picking skills). The Indian mutual fund industry has missed out on two good rallies one in 2009 and one this year. I see a systemic problem here. They never seem to know when the tide is coming and are constantly caught unawares. The current Indian mutual funds work mostly in a bottom-up approach (I am not refering to the top-down or bottom-up way with respect to sectors and the indian economy, but the bottom I am refering to is the Indian economy and sectors and stocks while the top refers to the global economy). Despite the fact and the characteristic of the Indian stock market that the majority of the investors's money comes from abroad, the mutual fund managers do not give enough importance to the money flow from abroad. They just believe in buying the right stocks and wait till the tide comes and the stocks rise. Though they the mutual funds talk about foreign money and majorly do secondary reasearch on international research reports, I dont think they are talking to foreign portfolio managers and FIIs who are putting and pulling money out of the Indian markets. If the fund managers understand the FIIs concerns and understanding and get the pulse of their investing mood/climate, they can buy stocks just before the tide is going to come and get out before the tide goes back, generating alpha for the investors.