India good investment option; like PSBs, metals: HSBC

DELHI, India - Feb. 23, 2015 - PRLog -- Foreign institutional investors continue to pump money in the Indian equity market despite poor Q3 earnings because it is the only good investing opportunity currently, says Tushar Pradhan, chief investment officer, HSBC Global Asset Management.

In an interview to CNBC-TV18, Pradhan says there are too many geo-political risks across the world and the only bright spot right now is the US apart from India that due to its demographics and growth stands out in the emerging market basket.

Pradhan says the Union Budget to be announced by Finance Minister Arun Jaitley will be very closely watched by FIIs who are hoping to see some significant change in Indian business environment.

Pradhan is confident on select PSU banks and on the metals space.

Below is the transcript of Tushar Pradhan’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

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Latha: Layout the foreign institutional investors (FII) mood? We have seen fairly decent FII numbers over the last two days and even if you deduct for the potential purchase of the Hero Motocorp shares it is still a fairly robust Rs 700 -500 crore that we are getting and in any case even buying Hero shares is an indication of a support for the markets and for stock valuations. You think FIIs will remain cheerful or will the Budget will be a very big thing that they will watch out for?

A: First of all let me just claim the fact that it is very difficult today if you look at internationally spots where you think investments will go your way as in up. There is a lot of geopolitical unrest across the world especially the countries that we have been looking at the BRIC country especially all of them except for India at the moment are pretty much under pressure. If you look at allocation across emerging markets as well except for some parts of Asia there does not seem to be any bright spot. So the bright spot today in the world is clearly the US followed by the UK to a little extent but then nothing else after that.

If you look at India on the other hand you are looking at a very interesting situation developing and the Budget obviously is a very significant impact to what this new story will come out to be. So in both cases the foreigners, the FIIs seem to be very keenly watching what is going to happen and they are definitely going to be interested in it, if it appears that this is a reform oriented progressive Budget.

Latha: Q3 numbers were actually a disappointment and we saw more downgrades then upgrades after that. Nevertheless we have not seen the FIIs tap shut out. Will they also take the Budget in their stride; I mean Budgets can do this much and not much more. Do you think the FII excitement with the Budget is palpable but not seminal and that we should count on continued FII flows into the country?

A: One can never really count on such things. All I am saying is that if you look at the comparative scenario even if the fact that the earnings have not been delivered for the third quarter and may be FY15 also might be somewhat less than consensus, if that happens to be the case I do not think the entire India story has to be written-off for that reason alone. If you look at earnings growth elsewhere in the world it is lot weaker than us. If you look at the GDP situation the new numbers you can debate till accounts come home but the fact is that this kind of rate of growth is not something which is seen anywhere else in the world. We tend to be a little more inward looking and we try to kind of bash our own industries for not doing well for this year. However, there were significant reasons for that. If the Budget indicates that this environment is going to change in any significant manner and we have already seen the start of little bit of that coming forward. Earnings growth is a matter of time. The markets also give you a signal ahead of when the earnings actually need to start to go up. I do not think we need to wait for the numbers to decide whether India is an exciting market to get that is what the FIIs are looking at the moment.

Sonia: Do you get a feeling that India could under perform the developed markets by the end of this year?

A: That is a difficult call to make; it is difficult to call markets how they move. If you look at what has being happening in the last three years clearly the developed markets have done a lot better than emerging markets. The move away from developed markets into emerging markets was expected somewhat in some time. However the overhanging Damocles sword is the rise in interest rates in the US itself. That will make sure that equities will under perform if interest rates either come a little ahead of expectation, the hike that is or the fact that it is something more significant from the perspective of slowing down the economy in the US itself.

Read more: http://www.moneycontrol.com/news/mf-interview/india-good-...