India good place to invest; see growth potential: Aberdeen

Below is the interview of Peter Elston, Aberdeen AMC Asia, Singapore with Ekta Batra and Anuj Singhal on CNBC-TV18.

Ekta: Could you just throw some light on what investors are thinking about the economic data that came out from the US? Could it just be an aberration because of the volatility that we saw due to the bad weather?

A: There are a number of factors that are being cited for some of the bad data that has been coming out; weather is certainly one of those. There are a number of other things that are starting to impact growth. Obviously what has been happening in emerging market is likely to have an impact on growth and that is starting to worry investors. So yes, ultimately it is all about growth.

Anuj: What is the sense in terms of fund redemption? We have heard that funds like yours may have faced some redemption pressure in some of your Asia specific funds, even India fund. Where do you stand on that? Have you seen any kind of selling over last 3-4 days?

A: We have seen a little bit of selling pressure, not a huge amount. Certainly there has been some money coming out of our broader global emerging market fund, but as far as our regional funds or our country specific emerging market funds are concerned the redemption flows are less severe.

Ekta: The Indian markets, especially the rupee has been quite resilient as compared to its emerging market peers and there seems to be a focus now shifting towards the Latin American currencies and maybe Eastern European currencies as well such as the Hungarian forint and maybe even the Argentine peso etc. In that context would India be a destination which would be more comfortable to investors?

A: I think so. By now you know our position on India. We think it is a fabulous place to invest, both with respect to the number of high quality companies that we have been able to find, but also from a top-down perspective in terms of the fantastic long-term growth potential that India has.

Obviously short to medium-term there are some challenges on the growth front, but longer term there is no doubt that Indian growth will recover. So yes, I think it is a great place to invest and that probably explains some of the resilience recently in the rupee that you talked about.

Anuj: Have you used this recent dip in India? There is about 7-10 percent fall in big names to buy and what kind of stocks have you bought in the recent fall?

A: We are already fairly heavily invested in India and have been for a number of years now. So we feel pretty comfortable with that weighting. In terms of the India's relative performance it has not been underperforming other markets to the extent that we would now want to be taking money out of other markets and put it into India. So no, we are not really changing our position in India at the moment.

Ekta: Is it then fair to assume that you would not be deterred by the elections that are coming up for India in the first half of 2014?

A: I am not sure really that things could get much worse in India. It has been a tragedy that growth has been allowed to fall from 7 to 8 percent a couple of years ago to where it is now, somewhere below 5 or 4 percent. That should not have been allowed to happen. So to a certain extent things cannot get much worse. If anything they should probably get a lot better.

Ekta: In terms of any sort of asset allocation that you would be working with globally could you just tell us where the equities rank versus commodities? As well and within the equities what would your pecking order be within developed as well as emerging markets?

A: I think our broad view on equities is that if inflation stays low but not too low then equities can continue to do okay, not withstanding the recent correction that we are currently seeing. The reason we think that inflation should stay low is that we think central banks will come in to stop economies from going into a deflationary environment and certainly growth is not strong enough to see inflation rising substantially. So in that sort of environment equities should be okay.

The danger, the risk scenario is that this slowdown in growth that we are seeing starts to accelerate to the point where we do actually enter a deflationary period and that would be bad for equities, but right now we are sitting comfortably and feeling that equities will recover.

Within our global equity funds our developed equity exposure is tilted towards Europe which we see as obviously still having a lot of problems, but gradually getting better and essentially one or two years behind the US.