Q: Given the crude oil situation would India be one of your least favourite markets now in the Asian region?

A: Yes, it would be one of the least preferred markets in Asia if the oil prices stay high. We did an Oil Sensitivity Analysis two weeks ago using seven variables to measure the impact of high oil price on economies and stock markets across Asia  and I am afraid that India did not square very well.

Q: Is there anything else which is worrying you about India in terms of either politics or recent policy action surrounding the crude mess that we find ourselves in, which is also sort of querying the pitch for this market?

A: Of course there are political issues and issues relating to food price inflation, but these problems don’t really mean as mush as the crude oil price. The Indian market has given back almost everything from the last year or so. So it is now down to valuations, which is almost  attractive for the whole market. Some large stocks in India are extremely well placed. So from a bottom up point of view I would be very comfortable with a few Indian stocks here.

Q: So aside from the under performance of the market as a whole, you are saying that you would want to start increasing allocation to a couple of specific sectors or stories?

A: Yes that is correct, particularly in the banking sector and the engineering space. There are very well run companies which still have good growth that are down to valuations that I deem attractive. The biggest bank in India is trading pretty much at one-time the book. The biggest engineering company is also very well placed.  So from a stock picking point of view I like India and from a top down point of view it is still one of the markets in Asia that appears more vulnerable.

Q: The point on Oil sensitivity, is there a one-to-one relation that can be drawn with crude prices and how much equity markets tend to under perform in that ratio?

A: We were measuring the impact of oil on economies, on inflation, on earnings, on GDP growth etc. When we added up all these things using seven different variables we found that India did not score well. I cannot exactly remember which points India scored most poorly on.