Global investors +ve on India despite inflation: Experts

A lot of the key hedge fund managers who run money in India are present in Geneva, attending the Indian Hedge Fund Conference. CNBC-TV18 caught up with Sunil Singhania of Reliance Capital Asset Management and Alok Dhir, Fund Manager, Dhir Capital India, for a perspective into the future.

Singhania said that people are a little worried about the volatility and inflation number and oil prices are causing concerns. But people are definitely looking or investing in India, he added. "The only thing that most investors are worried about is whether this volatility is going to continue for more time."

Dhir also agrees that there there is concern about oil prices and rising inflation. He believes that for the long shot and the hedge funds, this may not be a bad time to invest into India because the prices are coming down. "People still believe in the fundamentals of the Indian story and there would be further investments that people may be looking at making in India as soon as there is some level of stability both on the inflation and the oil sector."

Excerpts from CNBC-TV18's exclusive interview with Sunil Singhania & Alok Dhir:

Q: What is the mood in Geneva, because it’s not good in India?

Singhania: People are a little worried about the volatility. Definitely this inflation number and oil prices are causing concerns. But having said that, at least in Geneva, people are definitely looking or investing in India. The only thing that most investors are worried about is whether this volatility is going to continue for more time.

As soon as there is some stability in the market at least from this part of the world, you will see flows stepping in.

Q: Have you started deploying some of the cash that you were sitting in your equity funds over the last couple of days?

Singhania: We have been investing the cash selectively and our call there is very clear that buy stocks, which we anyway are very bullish on, and we have just deployed cash in the market. We have been selectively deploying over the last 15-20 days but we don’t intend to deploy USD 2 billion all in one day. It is going to be a process driven approach and a stock specific approach as far as the cash deployment is concerned. 

Q: Are you sensing any kind of redemption pressures for the hedge fund fraternity including your fund at the conference?

Dhir: There is concern about oil prices and rising inflation. However people understand the India story and it has been made out that we have suffered oil crisis in the past and we’ve got over it.

The sense particularly for the long shot and the hedge funds is that this may not be a bad time to invest into India because the prices are coming down. Sunil just mentioned that he may make selective investments.

The overall mood is bullish. People still believe in the fundamentals of the Indian story and there would be further investments that people may be looking at making in India as soon as there is some level of stability both on the inflation and the oil sector.

It works both ways for us as far as we are concerned. If the economy goes down, there is more stock available in the market for us to pick up. When the economy is on the upswing there are always exit opportunities and so we go short on it.

Q: Without getting into a specific figure, at the market levels where we are right now, how much of that cash would you look to deploy? Would you put about 1/4^th of what you hold right now into Nifty levels at 4,200?

Singhania: We are definitely looking at the markets on absolute level but right now we are more focused on what value we can get in stocks specific without hazarding or without giving you a figure of whether it is going to be 15-20% or 25%. All we can say is that at this point of time, we would be more aggressive in investing in the stocks which we like than we were say in the past 15-20 days.

Q: We were speaking to some other people attending the conference this morning who made the point that perhaps some of the fund of funds (FoF) will start facing redemption pressures by the time the quarter is done with. Is that something your picking up as well?

Dhir: They would always be, the fund of funds as it is cyclic for them. They would invest at a particular time and then they would like to exit at other times when they would want to have redemptions in their own funds. But there is still money, which looks towards India and there would be funds, which would continue to be invested in India.  

Q: Last time we spoke to you, you spoke bullishly about banks. Since then most banks are down about 20%. Have you upped your exposure to that sector given the renewed fears on interest rate hike, which have come into the markets since? 

Singhania: In few funds, definitely we have reduced exposure and obviously we were bullish on banks. We still are very bullish on banks over the long-term but what has happened over the last three-months, it has really come as a surprise in terms of intensity and duration which the negativeness has come in.

The biggest fear or the biggest sort of negativeness, which has come from the bank, is the raising of the deposit rates by banks without increasing the corresponding interest rates on advances. It was also coincided G-Sec yields going to 6-7 year high and also coincided with cash reserve ratios already being raised and probably there is scope for more raising.

A lot of negativeness has got bunched together as far as banks are concerned. From a price perspective, a lot of banks have come down below book value at least on the public sector banks. Probably, it’s a sector, which has great long-term potential. But in the short-term, it can be a very volatile sector. There is value for money but it has to be looked at from a longer-term perspective rather from a 3-6 months perspective.   

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