Deutsche Bank is holding its India conference, 'The Namaste India Conference', where more than 150 global investors are attending. Head of Deutsche Equities Keshav Sanghi states that medium-term foreign investors are still positive on India.
Deutsche Equities believes that the FII mood on India is the same as that on other Asian emerging markets. According to it, most of the FIIs are from the US and many are looking at India for the first time.
Deutsche Equities opines that we may see the GDP slow-down by about 1%. It is felt that India is less risky in the wake of Yen Carry Trade unwinding, says Sanghi. He adds that FIIs are concerned with reference to high interest rates and lower export growth.
Excerpts of CNBC-TV18's exclusive interview with Keshav Sanghi:
What is the global mood like since you have just had an opportunity to talk to so many global investors. How would you sum up sentiment right now in terms of investing in emerging markets?
It is a lot better this morning, you have seen the entire Asian region bounce a little bit, and India has opened stronger as well. It is definitely a lot better right now. I don't think the mood in India is any different than the mood in the rest of the Asian emerging markets.
This is just the reflection of the fact that you have so many FIIs now investing in India. The way they see it, India is like any other market out there and they are pulling money out of Asian emerging markets; India will see some pain as well.
Beyond that, they are pretty confident on India's medium to long-term growth potential. You are seeing a width of industry and clear visibility on some growth. Only some of the shorter-term investors are panicking. But the long and medium term investors are fine and they are more focused on the fact that you have a width of industry with clear visible growth, which should be okay.
Could you mention about the kind of congregation you have there, both in terms of what regions these investors are coming from and how many of them are first time India investors?
A lot of them are first time Indian investors. About 25% of the investors are the funds that are based here. But most of them are coming out of the US, there are a few
out of Asia and Europe as well and this is a healthy mix of the hedge funds and long institutional money as well.
For a lot of them experiencing India for the first time, it is important for them to get a width of exposure. They are seeing companies from every sector - from cement and engineering, to metal companies, to tech companies, to a wide spectrum of companies.
If you ask most of them, they tell you the same thing. They are very impressed with the quality of management in India, they are very impressed with managements
communicating their vision on growth to the investors.
They have all come from leading companies in Taiwan, Korea and many other places in Asia and they always go back impressed with the quality of Indian corporates and managements. So it is a broad spectrum of clients and leading a broad spectrum of companies as well and I think they go back very happy. It peaks their curiosity enough to come back and do a more in-depth analysis.
Did any of them voice any concerns that in the latter half of this year, towards the end of fiscal 2007, growth might be cooling down for some of the sectors in the economy or some of the sets of stocks which they like?
: There are concerns that the higher interest rates may cause some slowdown. There are concerns that maybe exports will slow down if the rest of the Asian economy slow down. But then, they also realize that you have growth at 30-40% and stocks aren't really very expensive, if you take multi-year growth into account.
There might be concerns on a few sectors. But on a broad rush for India, they are still seeing very strong growth. You may see GDP slowdown from 8-9% right now down about 1% from here but those are shorter term things.
The big thing that everybody is talking about, the Finance Minister mentioned it in his Budget speech as well, is the demographic dividend. You have seen the savings rate expand dramatically probably going up to 40% in a few years, given the demographics of India. They are seeing strong consumption at the domestic economy and they see that over a multi-year period.
The one month-three month stock movements are impossible to predict and they are not looking to do that. They can see the strong entrepreneur spirit here in India and can see the demographic dividend and growth. They are not really anxious about slowing growth for a quarter or two.
I was talking to a client about the high interest rates and he made a point that most of the large companies are borrowing equity or raising money offshore where the interest rates are still lower than perhaps what you can get here, so it makes them a lot less anxious as well.
Is there any reason to feel concerned that this market may not continue to attract so much money - I am just looking at your strategy report that says that India looks less risky in the wake of Yen Carry Trade unwinding vis-à-vis other emerging market, why is that?
You have to accept that India has very strong core reasons to invest. I agree with the Yen Carry Trade unwind and you have seen the impact of that on the regional markets already. But that applies to a small sub segment of investors for a much larger number of investors. It is important to know why they are investing in India. If you go to other markets in Asia, it is either the housing boom or finance sector or an export led economy.
If people are investing in India, they are investing because they see the changed working environment. They see a broad number of sectors, which are still growing whether it is the tech sector, which is still growing at 35-40%, whether it is cement and engineering, they can see that growth.
You can use the yen carry trade unwind to take the top of some of your investments. But relative to the rest of Asia, they are investing in India for different reasons.
So I feel pretty confident and I haven't heard more than just a few clients worried about a longer term change in their view in India because of a yen carry trade unwind that effects a shorter term
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