May see inflows from DIIs in second half of FY11: ENAM Sec

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May see inflows from DIIs in second half of FY11: ENAM Sec

CNBC-TV18's Udayan Mukherjee caught up with Dharmesh Mehta, Head-Broking of ENAM Securities at the sidelines of their FII conference in London to find out the overall sentiment among investors.

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Markets have been trading relatively firm amidst weak global data. However, most investors adopted a "wait and watch" approach.  

CNBC-TV18's Udayan Mukherjee caught up with Dharmesh Mehta, Head-Broking of ENAM Securities at the sidelines of their foreign institutional investor (FII) conference in London to gauge the overall sentiment among investors.

According to Mehta, investors were waiting for 5-10% kind of correction in India before making fresh investments. "The FIIs have been investing selectively," he added.

Going forward, he believed, the markets may see more inflows from domestic institutional investors (DIIs) in the second half of fiscal year 2010.

Commenting on his preferred sector pick, Mehta said, he remains bullish on the infra space. "Infrastructure, as a long-term play, definitely looks good and the valuations are very cheap." He is also bullish on the banking space.

Below is a verbatim transcript of his interview. Also watch the accompanying video.

Q: Are you expecting a 5 to 10% correction out here?

A: You don't say a correction like 5-10% is a large correction. In fact everybody is waiting for that correction to happen to buy into India more. India has relatively outperformed the world. Definitely people are cautious at these levels and knowingly there is going to be a large supply of paper coming in the next few months, people are going to be cautious buying into at the top end of the markets.

Q: What is the sense you are getting on foreign institutional investor (FII) flows through the month of September and October?

A: They have been quite decent. It is more an opportunistic way that FIIs are investing. If they see a large deal or a large placement like you recently saw IDFC and Adani where a large amt of FIIs came into that placement, almost more than USD 1.5 billion came into these two deals. So they are selective, but if they see an opportunity which is large, sizeable and which has good valuations, I think they are definitely going to come in.

Q: Are you getting any sense from the domestic fund managers whether flows from the domestic side or DIIs can pick up after the very rough patch?

A: We have already seen redemptions. If you see the last few months, we have been seeing domestic insurance, mutual funds selling, but I believe that the technical problems should be resolved within a few months and you might see inflows coming in the later part of the year.

Q: What sense did you pick up from investors from two of the key sectors-infrastructure and banking? Let us start with Infra first?

A: We are very bullish on the infra space. With the kind of growth levels we are expecting of India, we definitely need large amounts of investment coming into infrastructure. Infra in the long-term play definitely looks very good and the valuations are very cheap.

One has to look seriously into it. Metals are more of a global outlook rather than Indian. On that I would take a much larger global call and then look into the stocks. Valuations had run up in-between. Global growth will decide on metals.

Q: What are you telling your investors to do on the banking space which has corrected a bit of late?

A: We are very bullish on the banking sector. This is one of the most defensive sectors right now. Looking at the 8% consumption growth story in India, banking sector looks the best right now to be very defensive.

Q: How is the primary market situation looking to you? What is lined up for the second half or the last part of 2010?

A: It is more of a quality of issuance which comes in. Definitely the government deals are going to see large interest coming in because they are large sizeable deals and if they price it right as we have seen in last deal of Engineers India Ltd ( EIL ), I am sure there will be huge appetite and people will be surprised by the kind of money one may see if the valuations are right for these kind of deals. I think it's a very big positive for India coming up, if they price it in the right manner.