HSBC not worried about flows despite poor macros, monsoon

Further, if the situation in euro zone eases then that could trigger a risk-on rally which would correlate well with a high beta market like India, he added.

Sriram expects India to gain if commodity prices including crude prices cool off and that could boost India’s macros. According to him, deficiency in monsoon is a near-term worry, so global investors would consider India as counter cyclical within the BRIC domain. "From that aspect, I am not too worried about flows moving out of India," he added.

Below is the edited transcript of Sriram’s interview with CNBC-TV18.

Q: What is your expectation after looking at the past couple of days of a good move that we have seen on the index with respect to the flows, do you expect the good run to continue?

A: There are two interesting trends at play. One, we have had a lot of our own self-inflicted wounds because of lack of policy direction. So, there has been a reshuffle and the administration seems to be taking more proactive call in terms of taking some policy initiatives. If that be the case, then there are definitely a lot of low hanging fruits in India in terms of FDI proposals and various other issues, which they could tinker around with which could lead to a positive sentiment.

The second aspect is from a global point of view where there is an entire aspect of European refinance or a bailout of some of the stressed financing system. In case there is a kind of some activity there which comes through then you could see a risk-on rally again which usually would correlate well with a high beta market like India. So, on the whole, you could see some positive bias to the market from hereon.

Q: Do you see this kind of strong liquidity support from the global investors continuing through August?

A: If you look at year to date you had so much of money coming in and lot of the fears that money will pullout has been misplaced so far. One other aspect is that if you look at the way commodity prices have been behaving with the kind of slightly weaker data coming through from China, a lot of the BRIC markets and names like Brazil, Russia, Australia, resources heavy market typically, tend to be China proxies.

In case commodity there is a softness then India could well be a surprise winner in respect that if crude eases off, commodity eases off some of these worries monsoon obviously is a near-term worry for us, but the point is that if commodities and crude eases off then in that regard you might have the macro turning a lot better for India. So, people could well be looking at India as a kind of a counter cyclical within the BRIC domain as well. From that aspect, I am not too worried about flows moving out of India.