BANGALORE: The economic gloom might be lifting but venture capitalists and private equity investors are in no mood to loosen their purse strings.

Despite the current stable political environment in India backed by a strong domestic market, investors say it will take some time before sentiment improves. Multi-stage investment firm Norwest Venture Partners' managing director Niren Shah sees opportunities only in late–stage funding in the current market conditions.

Niren Shah, managing director, Norwest Venture Partners India, said: "In venture capital, the money never went away... the money was always there. New money certainly was not coming in the last few months, and I don't think new money is going to come in the next few months. We are Not, not doing venture capital deals but we kept the bar there very high and shifted a lot of energy to late stage... that is where we feel the opportunities are..."

According to a recent report, venture capital investing outside US drop 50% in the first three months of 2009. Europe saw a decline of 35%, while the drop in China was 58%. Israel saw a sharp decline of 75% and India saw a 29% drop in investment.

With a $150 million India fund, IDG Ventures head Sudhir Sethi says he wants to ensure the company's nine portfolio companies emerge stronger from the slowdown.

Sudhir Sethi, chairman & managing director, IDG Ventures India, said: "When markets are not moving up, we as investors have to go back to our portfolio companies... like any other company, we have to tighten belts. So, what did we do? Between October and December, all our companies reduced costs between 20-40%. We created space for making sure that our existing portfolio companies were more productive, performing much better at a lower cost..."

Despite the funding crunch, most venture capitalists say there is no slowdown in the amount of start-up ideas this year. They expect investments to go back on the growth path by the middle of next year, and see India leading the way.