India has seen about a billion dollar fund inflow during April. So are foreign investors positive on India? Punita Kumar Sinha, Senior Managing Director of the Blackstone Group gives their view on India. She said that the results season has been good. Though, she said, the guidance of tech companies has been lower, they are not negative on technolgy sector, as rupee may weaken. She adds that interest rates are yet a concern, because they could be hiked once more. They are also more concerned about the domestic political situation in India.
WHEN ASKED ?
If you look at the Indian results which came out in April, were you surprised by the strength exhibited by the Indian companies?
A: The results have been quite good, but I think the effect is going to come on during the next quarters. We didn�t really expect to see much in this quarter anyway.
Q: When you say effect, do you mean the effect of a stronger, higher interest-rate, perhaps a stronger rupee on tech companies?
A: Tech companies definitely have shown a lower guidance, but I wouldn�t be surprised if the rupee was to weaken again at some point down the road. So, I am not willing to really go negative on tech right now.
Q: Do you think interest-rates will start biting now with the lag and how much of a concern is that?
A: Interest-rates definitely have been a concern in India, and I wish they had been raised earlier last year, so we wouldn�t have to have such inflation worries right now. However, for the moment, it looks like interest-rates could still go up one more time. But it�s hard to say how long they will keep going up. Definitely, domestic demand will be impacted negatively down the road, as it should be.
Q: What is the call on the market?
A: Actually the valuations are not that expensive anymore. Last year, we were quite concerned about valuations of the Indian market. But now, if you see the strength of the markets regionally, India doesn�t look that expensive. Infact, China is more expensive, some of the other markets in Asia are more expensive. However, earnings growth might slow down more than predicted. In that case, one could say that the market may not have factored all that in. But it�s too early to say that right now. I am not that concerned about valuations.
Q: What pockets concerned you the most, by way of earnings disappointments?
A: I think domestic consumption demand is likely to slowdown further and what concerns me most right now, are the sectors that are dependent on government intervention for price increases. So, what we have seen in cement, we might see that in steel and other sectors down the road. I am a little bit more concerned about sectors, which are dependent on price increases only.
Q: How are valuations looking in telecom and what kind of growth prospects are you looking at?
A: The valuations are very high in telecom. They have always been very high, but the growth keeps coming in a very positive way. As long as the growth continues, I really don�t understand these valuations.
What�s your sense of flows at this point, because this market has managed to lap up quite a bit by way of appetite in the past month or so? Is interest back in this market and can it sustain this sort of inflows?
A: Actually, foreigners are underweight in India; there is concern in the US on India right now. It�s no longer the favoured market. This year it has all been China and the other Asian markets. So Indian funds trading in the US are actually trading at discounts versus trading at premiums over last two years. Definitely, I don�t see a huge amount of flows coming in from the foreigners. Domestically also, interest rates being high, the main flows may slowdown here as well.
Q: What has been your own experience at Blackstone? Have you seen higher or greater inflows by way of flows for your India specific properties?
A: In the funds that we managed are close-ended funds, so we don�t see inflows and outflows. We did a rights issue last year, which was very successful. At the moment, we are not looking to raise additional funds for India.
Q: A billion dollar inflows from foreign funds in April, does that number catch you by surprise?
A: Yes, I think so; I am a little surprised definitely.
Q: As you said, we are quoting at a fair discount to our Asian peers. Do you think discounting on Indian market will drop from here, or do you think they will carry on at current levels?
A: I think the market is still at a high, compared to the last several years of its own history. In that context, it could get discounted further versus the rest of Asia. I don�t think it will get discounted a lot more from here.
Q: What concerns you more about this market at this point? Is it global cues that might impact the momentum, or do you think domestically we are in for more pain with interest-rates?
A: I am actually more concerned about the domestic situation, because the political situation isn�t very stable, and also the macro-environment isn�t great. With the rupee appreciating and interest-rate going up, there is a difficult balance for the government to achieve. Therefore, most of the concerns come from the domestic situation itself.
Q: Are you concerned that we could see the next two years as almost election years, with the government taking no action on any kind of reforms and going hard on inflation and increase in cost for the industry?
A: I do think that politics is a concern, and the government isn�t going to be able to do much at the moment, their hands are pretty tight.
Q: What sort of reasonable earnings growth will you give this market, given the rates and pure volume growth?
A: I would say, less than 20% but somewhere around 15%.
Q: Where does India stack up in the entire Asian basket for you?
A: We have been underweight on India in our Asian funds.
