Excerpts from CNBC-TV18’s exclusive interview with Geoff Lewis:

Q: What’s the mood towards India amongst people in the region - are they still panicking and do they still want to pull out more money?

A: The people are panicking and tend to be outside of the region - Asia, ex-Japan. For investors who are based in Asia, we haven’t really seen such a huge change in the fundamentals that are driving the long-run story for India. The market is a lot cheaper and what has happened is that any emerging economy that was a large oil importer like India, which gets its 70% of oil needs imported and which is in a current account deficit position. These are the markets that have tended to be punished particularly and India had outperformed so much over the past three years; it was very right - profit taking in the first quarter.

So these are the factors that have driven the Indian market down. Short term, the current account and inflation fears and the vulnerability to oil are likely to be with this for some time longer so it’s difficult to be optimistic short term but this has the makings of a great long-term buying opportunity.  

Q: Are you witnessing any redemption pressures or hearing of any absolute return funds in trouble, the hedge funds who invest in India?

A: Speaking purely from our own experience, we have been surprised that the redemptions so far have been relatively moderate and mostly have been sourced from investors, outside of the Asia region - more from investors, say Europe or elsewhere. So we haven’t seen that sense of panic and so far on an aggregate scale, it's something like USD 6 billion worth of net portfolio outflows from foreign investors in the Indian stock market here today. That compares with some thing like USD 51 billion that was invested in the 5 years from 2003-2007.

So clearly more foreign money could come out and having said that, the global risk appetite - if you look at things like the CSFB ( Credit Suisse First Boston); Risk Appetite index is already right at the doom and gloom levels and it's difficult to see that index dropping much further. So unless we really see the oil price; everything hinges on this and it's impossible to forecast - oil is in a mania stage and unless oil tracks a lot higher; spikes even higher, then probably we are not going to see an acceleration in that outflows. But we certainly are still seeing negative inflows.

Q: For the outflows that you spoke of, is this happening mostly for country-specific funds in case of India, or is this phenomenon across some of the Asian market or emerging market funds?

A: It’s something which we are seeing across emerging markets, the funds are low. Some emerging markets such as the Middle East funds, the Russian funds are benefiting from higher oil and commodity prices.

In Asia, there is a high recognition that the ASEAN (Association of South East Asian Nations) countries are seeing higher inflation and not very strong guidance from the Central Banks and we have seen some outflows from India, but not as much as one might have expected, given that the market has underperformed - Asia is down about 15% year to date. So there could be more to come, but it depends on oil and it's very difficult to get a handle on the oil market right now. There seems a lot of oil on the water as it is and there is a new supply coming in from Saudi Arabia this summer and in 2009, we have got one of the biggest new fields ever . So it all hinges on the oil price, but there doesn’t seem to be any good news in the short term.

Q: Along with the macro concerns, as you have pointed out, things have not worked our way on the currency front; the dollar is weakening against most currencies but not ours, how worried do you think the institutional investors are about the way the rupee has moved for the first six months of this year?

A: I think it has been a matter of concern that the currency has depended on the need for India to attract long-term capital inflows because of the size of the current account deficit and having said that, I don’t think there is any sense of panic because the RBI has been one of the most proactive of Asian central banks and it has one of the most focused policies and it has raised the repo rate buy ten times over the last couple of years including 75 basis points on two occasions in the months of June and also has tightened up in terms of the CRR (Cash Reserve Ratio).

So in that sense and also if you look at the credit growth - that’s come down and broad money supply growth; it’s difficult to argue that the RBI has been a long way behind the curve - it’s further ahead than a lot of ASEAN Central Banks and that would be a positive for a lot of foreign investors.