The Hindu Business Line : ‘No big FII outflow seen due to terrorist attack’

Kolkata, Nov. 28 Mr Arindam Ghosh, CEO of Mirae Asset Management, which handles offshore advisory portfolio worth $1.8 billion in Indian equities and has a domestic investment fund asset base of Rs 1,000 crore, speaks to Business Line.

Do you see FII outflows accelerating in the aftermath of the recent terror attack?

I do not expect any material impact of the terrorist attacks on the quantum of outflow. Terrorism is a global problem, portfolio investors have learnt to live with it.

How can we compare this attack with 9/11 from stock market perspective?

In some ways it can be compared with 9/11. Mumbai and New York are financial capitals of their respective countries. But no two situations can have same impact. In Mumbai the recovery would be quick. Next week onwards things would be back to normal. The process is already on the way.

Will the risk premium of Indian stocks increase now?

Not really. Indian equities, after a sharp correction, have reached attractive valuation levels. Though at a macro level among the emerging markets, India still fetches premium over others. But it would be wrong to see Indian equities from top-down. The market is oversold and provides ample opportunities if one took a bottoms-up approach. Rupee has corrected and is likely to remain range-bound for some time. Low export content and current lower inflation have seen fundamentals largely unimpaired.

What is your strategy?

Bull market tools for stock picking do not work in bear market. There are several Indian companies with high dividend yield, cash flows and low debt-equity ratio. We are not taking macro view, not even sectoral view, but micro view specific to identified stocks with decent predictable cash flow and low leverages.

Will foreign direct investments be impacted too?

Not at all. Continuation of a steady flow of foreign direct investments is likely as the long-term story remains more or less intact.

Which sectors will be affected due to the Mumbai assaults?

Tourism and hospitality sectors may see some slowdown in the short term. Apprehension of insecurity may impact realty valuation in prime locations in south Mumbai for a short while.

When do you see Indian markets attracting FIIs inflow?

The second quarter of 2009 may see the US market situation stabilise. This may trigger fresh interests in emerging markets, including India. There have been a large number of fresh registrations by FIIs recently. They may start investing slowly even before the second quarter. The frothy part of the hedge funds investments is already out. Those who are still there are predictably for the long-term. In fact, hedge funds have seen bulk of the redemption in the second part of November.

December may not witness a great deal of hedge fund money being pulled out from India. The forthcoming elections are not really a deterrent for fresh investments. Once the confidence returns for the global investors, things should turn positive.

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