How are hedge funds viewing India currently and what is their strategy for markets here right now?
James Breiding of Naissance Capital says that they have currently adopted a 'wait and watch' approach towards India.
He is waiting to see if the Sensex can sustain above 12000.
Breiding further says that he has not seen much redemption pressure.
Excerpts from CNBC-TV18's exclusive interview with James Breiding:
You have got an exposure to Indian Hotels and MTNL, other than that there is not too much exposure to what people called the Indian consumption story, not too much of financial services, not too much of autos. You don't believe in that story?
I think right now it's a wait and watch attitude. It's hard to imagine that India will decouple from the global equity markets. The market has been able to climb back quite well since the May-June correction.
But the market does seem to be running out of steam and lacking conviction. At a time when there are some concerns about the growth in US economy, we are very pleased with what India has done.
However, we have pegged back our holdings in general. This is just to wait and see whether like many others, the market can really break through this 12,000 levels or not, and continue its bull rally. The good news is that India has continued to exceed high expectations.
As a percentage, how much cash are you sitting on at this point and what have you sold out of the past month or so?
We continue to maintain our holdings. We are still very committed to these companies. We are quite tempted by the market mood right now. Though it is a very tricky time to really understand whether the market will continue to head upward or is vulnerable to corrections.
So for the time being we are a little bit hesitant. Among institutional investors and foreign investors, the general perception is that India is quite well priced compared to other emerging markets like Russia, Brazil, China, etc.
Anecdotally, have you heard of any redemption pressures coming in across funds?
I don't think we are seeing so much by way of redemptions. We have really come back 60%; we have recaptured 60% of the correction. It is good that the correction happened as quickly as it did.
Because I think probably had it occurred in a more gradual way, a lot of investors would have lost confidence. As it stands, they were left a little bit shocked and held on to their investments, at least that is what we have seen.
So any further move into or out of India will then depend on so much earnings or is it more about sustaining above a level and what is that level?
I think as the earnings story continues to unfold then our view is that India has gone through an incredibly good run and investors should be quite pleased with what the results have been year-to-date and we are seeing the Nifty, which is up more than 20-23% year to date, which is a pretty satisfactory return.
We are at a point of the cycle where we had a huge amount of de-leveraging with lower interest rates and we have had greater utilization of capital expenditures and a very good run with regard to consumption.
I think the monsoon has been more or less benign although there have been excesses and shortages on a regional basis. So the earnings will have to continue to unfold and I think they will, but that will be a medium term story as opposed to a short-term story.
For the last couple of days, weeks what we have seen is large FII inflows so is there a possibility of liquidity turning things around here and would that make you change your mind about the level of aggressiveness that you have on India?
I think there is a case to be made that in fact sentiment would improve and sentiment is slowly improving. It has improved over the last few months obviously from a very low level. And I think if there was a real conviction in the market that there would be a soft landing, I think we would see India outperform. As it stands right now, it is really a tough call to make. I wish I could be more reassuring.
For more on markets & business, log on to www.moneycontrol.com.
