Rates in India, China may nudge up: Morgan Stanley

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Q: Where is new interest coming from for India and have you heard of new money being raised or existing India specific fund picking up more money now?

A: You probably need to ask an India specialist on that; certainly we are still seeing signs of interest in India - expressed through BRIC funds or emerging market funds. It would appear from these sources that we are seeing a return of positive inflows into emerging markets.

Asia is doing better within that, but to us it doesn't seem that we have seen anything like a return to the levels we saw in the period from last October to April, which is an extraordinary period of liquidity. However we dont need that at this point in time. So yes - interest seems to be high, though doesn't seem that evident in terms of the actual foreign flows at this point in time.

Q: What is Morgan Stanley's 12th month target for the Sensex?

A: I would be looking for the market to be quite a bit lower than it is now. I think we just need to put that in the context the my earlier answer to your question on appropriate valuation for India. I think Ridham would say that he is medium-term bull on India. But the question of the valuation you want to put on that - core India is standing roughly at 50% premium to similar valuations in developed economies, developed markets. So a lot of growth priced into India at the moment, we think India should be trading relatively higher valuations but that's just too much, so that drives our call for a lower Index.