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See 10-15% correction in mkts: Aberdeen AMC

Published on Tue, Jul 14, 2009 at 10:58 | Source : CNBC-TV18

Updated at Wed, Jul 15, 2009 at 14:45

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Hugh Young, Managing Director, Aberdeen Asset Management Asia

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Nifty

BSE | NSE 13/02/12

Are Mutual Funds betting on Nifty?

Q: Where does India fit into the picture for you, would you classifying it in that expensive bracket or has this 10-12% correction skimmed-off some of those excess valuations?

A: It skimmed-off some of the excess but I am afraid India is still for us is in the expensive bracket, short-term but within emerging market funds we have substantial exposure to India and within our Asian portfolios we have substantial exposure because for us being long-term fundamental investors, we still see India having some of the best companies within emerging markets and some top ranking companies globally. But likewise even in India, I am afraid we wouldn't be surprised to see a setback and would think it quite healthy and then we would simply look to buy more.

Q: You do hold a fair amount of technology in your India portfolio and the point has been made that Indian IT is trading with a large valuation gap compared to its Asian peers. In that would you look to increase exposure to information technology here?

A: We have quite chunky holdings in companies like Infosys and TCS. We are very happy with them. They are facing an uphill battle at the moment given the outlook globally. But with their balance sheets and long-term business prospects, they are stocks where we are very comfortable adding to on bad days.

Q: There has been some talk in India over the last few days of interest rates having bottomed out, and eventually, heading higher because of the government's large borrowing programme. What are your thoughts on that and how would you translate that into your investment call in the financial space where you seem to have holdings in many of the large private sector financial stocks?

A: We have large holdings in the likes of HDFC and ICICI as well in our Indian portfolios and one of the macro problems India is facing is on the government and deficit front. We would not necessarily be surprised to see interest rates moving upwards at some stage. Although the economic outlook is still cloudy there is no immediate pressure. A stock investors for us primarily what we are looking for is the companies that are well-run, well-financed and have a solid long-term business plan and that's what drives us over the long-term. Short-term, yes, worries about interest rates, government deficits and slightly disappointing budget have slight put us off shorter-term but then we look again at the companies and what we see at the company level we are very encouraged by.

Q: There have been large dollops of paper on offer as well particularly from spaces like infrastructure and real estate in the form of Qualified Institutional Placement (QIP). Have you been looking at that as well?

A: No we haven't. We have been sticking to our knitting for example recently we have been topping-up holding structure, Hindustan Unilever, so we have been keeping pretty plain vanilla as far as our portfolios are concerned.

Q: What about monsoons? Do you think the scare is overstated or as an India investor you are a bit worried?

A: I think in the short-term it will be an influence but for us as investors that's not an immediate concern because next year will be a problem as well. We can't predict that far ahead, so again for us it's just a matter of focusing on the companies and making sure that they are doing all that they can and buy and large they are.

Q: Not asking you to predict the index because that's mug's game, but do you believe that 8,000 Sensex is firmly in the past and if yes then where you would draw the line for the index even if you believe that there is some more of a downslide in Asian markets including India?

A: You are right it is mug's game predicting indices and as I say we are so stock specific. There are certain stocks in the index that we wouldn't look at it even half the price and there are stocks we would happily hold whatever the index level is. There is certainly scope for India to pullback inline with the region and I think one has to be realistic and as I say a 10-15% pullback in my opinion would be healthy. But, of course, benchmarks and indices never do what's healthy for them. They tend to overreact either up or down. So we could well see a more dramatic fall if confidence shatters elsewhere in the world and its still fragile underneath.

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