Here is the edited transcript of the interview on CNBC-TV18.
Q: Last few months from August have been very good months in terms of fund flows for India. It has almost been an unusual kind of high. Do you think this kind of bonhomie will continue and will India be a slightly larger beneficiary of fund flows?
A: Yes, it certainly has been an interesting period. Most of the fund flows come from emerging market funds along with China being a very meaningful part of the emerging market index. I think the investor appetite reengaging with emerging markets has seen these flows and for them to continue You need to see an improvement in global sentiment towards equities in general and importantly, towards emerging markets.
Q: India has seen a strong amount of fund flows on a YTD basis in 2012. But, the macros actually on the other hand have not really supported us in terms of strong fundamentals. The fiscal deficit scenario and maybe even slowing growth at this point in time and high inflation of course has not helped. Give us a sense in terms of what is the rationale that foreign funds have with regards to deploying funds into India right now?
A: I think it is part of a portfolio approach. Emerging markets as a theme continue to gain traction in western markets across the US and Europe. There continues to be a lot of interest in those long-term trends that people see for growth in India. Things like demographics, the fact that parts of the Indian stock market have world class companies such as information technology, information services etc can only gain access to those type of companies through fund investment such as emerging market fund. I think professional investors look forward to those long-term trends and looking through some of those shorter term issues.
Q: How would you see Indian and emerging markets performing over the next six months? Are you more bearish or more bullish?
A: Making short-term predictions is very difficult. There is still a lot of noise globally. When you look at the global macro picture, I think a lot of investors are still looking to get through the US elections, get through the issues around the fiscal cliff and issues in Europe. Those short-term sentiment issues continue to plague investors.
But, I think people would take a longer term view. Investing in equities through mutual funds is definitely a long-term investment. People look at valuations and taking a long-term view. I think they are prepared to commit capital. In the shorter term there are reasons to be cautious, but I would not be trying to time markets over the next six months.
Morningstar as a business is all about long-term investment. Looking through the cycle people are seeing reasonable valuations for the longer term. But I think the short-term issues are clouding the situation, so I am not looking to make a call on the next six months.
More to come.
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