FIIs still find India value for money, say experts

January and February are very rich months for data before the Budget comes. Citi bought together a power-packed panel to dicuss the Indian growth story. The names include Pankaj Vaish MD & head-markets of Citi South Asia; Mintoo Bhandari Apollo Global India Advisors and Harshal Shah, CEO, Reliance Ventures.

Playing the moderater's role was Subhomoy Bhattacharjee Deputy Editor, Indian Express. Below is the verbatim transcript of their interview to CNBC-TV18 Bhattacharjee: Talking of the macro right at the beginning because the 5 percent is sort of the monkey on the shoulders of everybody. So when you look at it what is your comment and what do you think is where we are right now? Vaish: Five percent is abysmally low for where we are in our secular phase of growth. Cyclically that is 5 percent real and 11-12 percent nominal. It is something that most of the world would give their right arm for. However, where India’s aspirations are we need to be growing at 9-10 percent real for the next 20 years. We should not stop until we have clocked 20 years. Bhattacharjee: Taking a very short-term view before we get on a slightly long-term 2012-2013 is already done and the accounts are made, cleared and fine. 2013-2014 what does it mean for India? Vaish: For 2013-2014 we are still somewhat optimistic. The arrival of Chidambaram in the finance ministry was just a breath of fresh air. There was in the summer a lot of despair in terms of the general anti avoidance rule (GAAR). So, Chidambaram, our own MITs, Raghurajan and the Secretary DA coming in, these are all people who seem like a cohesive team who just came out with a flurry of announcements and showed clear intention. Obviously one must have had the political backing of the Prime Minister and Sonia Gandhi that they were going to take on some of these politically risky propositions. So, that really puts the wind in the sails. One has seen the market rally a lot from those levels. 2013-2014 will continue because if anything we have seen the Finance Minister really sticked to that 5.3 and 4.8 percent. That Rajan has re-emphasised in his speech that they are really sticking to it. That is a huge commitment in a frankly still a populus country like India. To make that commitment and say we are going to stick to that fiscal deficit. If they can do that it will be amazing. The bond market felt a lot comforted. One has seen yields that have come down after that, the Reserve Bank of India (RBI) felt they had the room to cut rates. So, those good feelings are still there as long as these politically difficult decisions can be adhered to. If there is any wavering on that one could go back to the sort despondent feeling that was there last summer. Bhattacharjee: There is a lot of this at the New York Stock Exchange (NYSE) and others there is this India exchange traded funds. Surprisingly quite a few of them are doing quite well. We talked about a lot of things not happening well but what makes those do well? Bhandari: First of all, India still represents a relative bargain for foreign investors, especially vis-à-vis a local investor. Local investor has seen Sensex go up in rupee terms. However, in dollar terms, foreign investors still see India at a discount. Sensex is kind of 15000 not 20000-21000. There is meaningful headroom for improvement here in terms of the foreign investor perspective. India from a number of factors, one is that the per capita gross domestic product (GDP) of India is still very low. So, when one looks at the opportunity set and economic gravity it is still grading in India’s favour. In a risk-on environment where people are not worried about Europe falling down or America having very sluggish environment. When things are stable and people are being optimistic around the world. That risk-on environment is going to benefit India and it is going to continue too. Bhattacharjee: Do you think that despite all the problems that we just talked about the environment center gravity is still shifted? Shah: I happen to come from an industry in which we end up taking regulation as given. We end up taking hardships and challenges as a given. Venture Capital by its very nature happens to be one such area in which you just have to figure out your ways around things. However, out of 18 investments that we have, almost each and every one of them is trying to figure out ways in which one can go ahead and end up constantly capturing the value add. Also taking as much of it towards themselves as much as one can. They have done a fairly good job at doing that. Keeping that in mind and then looking at some of the other examples that are out there in the industry as well. If one looks at the venture capital industry, I am very happy about three things. One is that the quality of the entrepreneurs that is there, the entrepreneurial teams is increasing exponentially not just year after year but on a month after month basis. Two, there is a huge paradigm shift that is beginning to happen or which is already started and is underway is that the startups that are there are moving away from being resource driven towards opportunity driven. So, where they find an opportunity they are figuring out ways to go ahead. Then try and tap in a very dynamic and aggressive way. Three, we have constantly ended up thinking about startups and companies and so on and so forth as being based either out of Delhi, Mumbai, Bangalore or Hyderabad. However, what is beginning to happen is that in tier II, tier III cities and in villages there are some incredible ideas and innovations that are out there. They are being taken up to the nth degree. So, keeping all those three things in mind the venture capital industry per se also as a bulwark for creating entrepreneurship and employment opportunities as well it is a very positive thing that is happening within the country. There has been a shake out amongst the companies which were just created as fly-by-night operators. However, that is fine and that is a good thing. Going forward into 2013-2014 there are going to be some fantastic opportunities coming up. I keep looking at it on a very positively in an optimistic way.