'Long-term hold on India with positive bias; buy on dips'

Below is the edited transcript of their interview with CNBC-TV18’s Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Q: It has been a couple of days of volatility in the emerging market space, but as Adrian Mowat of JP Morgan was telling us earlier perhaps some of it is unwarranted and one should not get too perturbed by it. What is your understanding of what has taken place over the last couple of weeks and how one should approach emerging markets like India?

Freeman: One of the problems that is causing is this situation is simply investor redemptions. We have large funds getting redemptions from their own investors in mutual funds, ETFs and so forth and they have to sell. This is a situation where we have retail investors moving the market like this. It is no surprise that the Fed would reduce the quantitative easing (QE) they have been doing. That may have triggered a little bit extra selloff, but yet it is still early to blame it on earnings since so few companies have really reported.

Q: What did you make of the collapse that we have seen in some of the emerging market currencies? Do you think a market like India might be overreacting? How would you approach the EM universe and a market like India?

Oliver: There is a bit of overreaction here. It seems that last week traders and investors suddenly saw on their screens storage volume to Turkey, Argentina and Ukraine and then had decided the common denominator was their emerging countries, therefore they must be in emerging market crisis and it had been the cry ever seen. The situation in emerging world is not as bright as it was a decade ago. Back then, it was the advanced countries which were going through a bit of a malaise.

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The emerging world was in very good shape, but now you have got a situation where some emerging countries have higher inflation rates, lower economic growth, credit imbalances, inflation and of course some political problems in some of the countries as well, so that has sort of created a bit of a cloud over the emerging world. I do not think we are in some sort of situation like we were in 1990 where the emerging world was plunging into the crisis which ended in to be a recession. We are long, long away from that.

These problems, the one of slower growth, investors perhaps investing lesser than they used to be, but I certainly do not see it as a major crisis. The real issue here is that shares globally had had a huge run through last year, particularly in advanced countries. Sentiment had become a bit overcooked and they were vulnerable to a correction and that is effectively we are seeing now. I do not think it is the start of an emerging crisis where one should head for the hills.

Q: Since you do not see any major crisis in the emerging markets how would you approach a market like India? We are just a little off our record highs. Do you think India could continue to be in a bull market it has been or is there a risk of that getting arrested?

Oliver: Indian share market has performed surprisingly well. The problem for it is that the price earning multiples are relatively high compared to the rest of Asia or compared to other emerging markets like the Chinese share market where the PE is around 7 times in India or depending on which PE you look at, it is around 13 or 14. Yet you could argue will China have better growth and lower inflation than India does, so in a sense it is a bit overvalued. Therefore that is a big area of vulnerability to the Indian share market.

Am I expecting negative returns out of Indian shares this year? No. I think you will see small positive returns. Certainly against that background I will take is environment where there are dips, there periods of panic that we are seeing as buying opportunities rather than as a reason to get out. That is the way I would say is. Would I rush back in at the moment? I probably would not. This period of selling could get on for little bit longer, but sometime in next few weeks you might to look to rework towards buyback into the Indian share market.

Q: What is your call on emerging markets? In a year in which we are likely to see the Fed and its QE and maybe even raise interest rates, do you think the emerging markets could outperform or do you think it is asking for too much?

Freeman: I would expect the US currency to appreciate which generally is not favourable for emerging markets. On the other hand, depending on movements in currency, we could see exaggerated losses for US dollar investors who have their holding rupee denominated shares. Maybe the domestic market itself does not decline so much, but if unless the rupee can gain some support, it is more of this kind of double whammy effect where maybe the market will be flat, but the rupee will be weak. So, from a US standpoint we would have negative returns. In general it is too early to make a call on India, because so few companies have announced their reports.