India remains a concern for FIIs: CCAM

Mark Konyn, CEO, CCAM, feels that the markets have reacted very negatively to the Cyprus issue, but the last minute deal which Cyprus clinched has ruled out the possibility of any immediate threat of Cyprus disrupting the status quo in Europe.

However, investors are now willing to re-enter the market and pick securities which are cheaper than they were when the crisis came to the fore. "At the moment, investors will look at the opportunities to take risk and wonder what will drive returns because at the moment it is a sequence of start and stops," he said in an interview to CNBC-TV18. Apart from China, this year there are many challenges with India which is causing concern among investors, he added. Below is the edited transcript of his interview to CNBC-TV18. Q: How do you read the overnight statements that came out of the Eurozone? Are you now sure that the Cyprus problem is behind us and what will be done is only the implementation of an agreed agreement? Is the worst over for the markets from that end? A: The markets react very negatively given the size of the separate economy. It has once again highlighted the risks associated broadly across the Eurozone. However, the immediate threat of Cyprus disrupting the status quo in Europe and seeing more contagion across the continent now seems to be contained. The investors who were quite nervous and skittish when the news first broke seem to be more reassured and willing to come back in and pick up securities which are quite a lot cheaper than they were when the crisis first exploded onto the scene. Q: We saw some retrieval coming to the euro to 1.30. Do you think that it will not go back to levels of around 1.28 and that this relief rally could now continue or what are the risks that we could face on the downside? A: The risks are still present. From the current crisis we have learned that even though we are seeing successive periods now and reassurance from leadership that Europe is making progress with a number of issues, it takes one relatively small economy to disrupt that status quo again. We believe that we will see strength in the euro, but the volatility has now increased and we could see it return back to 1.28. Although, we expect that the euro will strengthen even further from current level. This is a type of a relief rally. I think only economics will drive the markets for the rest of the year and we know the economics are pretty weak.      Q: Will funds flow continue for markets like us? Flows into emerging markets were not healthy in March compared to January and February. Do you think flows in general will get stronger towards equities and will emerging markets now find a resurgence of flows? A: The situation is very interesting at the moment. In this region, other than Thailand or the Philippines, we have not seen investors rewarded significantly for taking incremental risk since the rally which began in October 2012. In periods, markets have done better in China and selectively in India, but overall the markets have not sustained that rally in any meaningful way.   At the moment investors will look at the opportunities to take risk and wonder what will drive returns because at the moment it is a sequence of start and stops. Apart from China, this year there are many challenges with India which is causing concern among investors. We are now seeing outflow from Asia in terms of funds data which is being released. It is bit worrying as there was expectation that as 2013 continues to move ahead we would start to see a resurgence in an allocation to these risk assets. With the way the euro is shaping up that it is going to be a continuation of the sequence of stops and starts.