A: There is a lot of cash on the sidelines waiting to be invested in the emerging markets, Asia in particular. We also have to realise that investor sentiments have improved a lot over the last two months and I think that will probably help over the next few weeks.

Q: What is the call on India in the entire emerging pack? Are investors looking at more value in this market or are they still waiting and watching out for a better price point to enter, also the kind of economic data that’s coming out of this geography. How are they reading into it?

A: First of all the India growth story is probably one of the most attractive in Asia. The high oil price has affected India more than a lot of other markets. Oil imports are at about 7% of Indian GDP. Then you have price controls, which mean subsidies for gasoline, that is the drag on the budget and so on. But if risk appetite returns, the Indian markets should be one of the beneficiaries of foreign capital inflow. We should be okay in the near-term, but we still have to watch for all these headwinds that prevail.

Q: You talked about the dollar gaining strength. For CY08 what is your call on how the dollar may end up against all major currencies?

A: It’s interesting that the dollar rally, given the positive sentiment by investors, has been quite sizeable from the bottom, but we don’t think it was going to last for a long-time. The momentum is still in favour of the dollar. We think the strength in the dollar will mainly be against the European currencies because the Fed has indicated that they have more or less lowered rates. At the same time the External Commercial Borrowing (ECB) facing the European economy, the second half of which is going to slowdown, they will probably have to lower rates. So the interest rate difference between the dollar and the Euro will start to narrow and there is where the dollar is actually benefiting from.

Q: Any tactical changes that you would make to a sector like technology because that had a bit of under ownership going into its quarterly performance. Now it’s not just delivered with its quarterly numbers but the rupee is been working in its favour?

A: The technology sector is not exactly where we are overweight because of its dependence on the US economy. The US economy is in a recession which is far from over. But tactically speaking with return of risk appetite this sector could benefit. But our focus would be on the consumer sector, the telecom sector, and some of the capital spending related sectors. In general Asian sectors that are not dependent on the US economy.    

Q: The concern right now though for the emerging market space seems quite clearly what’s happened with inflation on both sides’ energy and food. How have you read that and do you see any great chances of out performance in this sort of inflationary environment?

A: It is a problem. I think inflation is the biggest issue that emerging markets are facing and naturally that would that put the Central Banks in emerging markets in a pretty difficult position. One option would be to let the currency exchange rate drift off against the dollar and the other would be to raise the interest rates. But that again would lead to foreign capital inflow, pushing currencies even higher. These currency increases will come exactly at the time the US is in recession and it could undermine the competitive positions of the Asian economies. So I think that’s the thing that Asian Central Banks have to deal with. It all depends on the risk appetite which is on the rise at the moment and emerging markets should benefit at least in the near-term. We will have to watch out the as US economies are still not out of the woods and we may get some pullback later.