Saturday, February 12, 2011

Indian markets expensive relative to Southeast Asia: Sashi Krishnan, Bajaj Allianz Life Insurance:

In an interview with ET Now, Sashi Krishnan, CIO, Bajaj Allianz Life Insurance, talks about the market and ETF outflows.

How are markets looking? Are you scared? Are you worried? Are you tentative?

No, we do not get scared by corrections in the market. In fact, we see corrections in the market as an opportunity because we are long-term investors and strategically we are bullish on India and these kinds of corrections are actually very big opportunity for us. We still have close to 20% of our large cap and mid cap portfolios in cash and we will get an opportunity to deploy this cash as markets correct.

Does it seem like the climax for the index at least is still pending and that we are going to continue to see EPFR and ETF outflows?

As far as ETF outflows are concerned, all the signals that I can read at this point of time seem to suggest that they will continue. I see a fairly large numbers of ETF outflows not only in India but across emerging markets as a whole. Even China has seen close to $1.5 billion of ETF outflows. India could have seen something like 400 billion of ETF outflows over the last couple of years.

ETF outflows are fundamentally a function of the fact that the view on the rupee is still negative. People expect the rupee to depreciate and the fact that on a relative basis, there are other markets - emerging as well as developed - that are looking more interesting than India. So ETF outflows will not stop in a hurry and, therefore, possibly avoiding stocks where the FIIs and the ETFs are overweight could be a reasonable strategy at this point of time.

We are seeing incremental selling in pockets like IT which were sort of stalwarts up until now and the last hope now seems to be caving in. How would you use this opportunity? Would you buy into IT stocks or would you book profit?

Some part of the selling that could come into IT stems from the fact that a lot of stocks that are overowned by the foreign investment institutions and the emerging market funds could come in for some sort of selling. That could be one of the reasons why you are seeing selling in IT. But if you look at it from a long-term growth perspective, we do believe that the opportunities in IT still remain. This is because any recovery that you see in the US economy will clearly benefit the IT sector. We also understand from our conversations with IT companies that the spending that a lot of the large US banks will be making in IT over the next couple of years seems to be on the rise. This will clearly benefit the IT sector. So from a fundamental perspective, we would still look at investing into IT and especially if they correct significantly now.
Source : ET

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