Thomas Gerhardt, head of global emerging markets at DWS Investments says that they are positive on India, but valuation is the only concern.
DWS Investments is now looking at buying stocks; it has already invested in infrastructure, cement, steel and construction sector in India.
Excerpts from CNBC-TV18's exclusive interview with Thomas Gerhardt, Head of Global Emerging Markets at DWS Investments:
What have you done with your investments in India, and what is the call on the market at 9,500 levels?
What we have done with our investments, at least we have not sold a lot. We have been quite positive on India. We are really concerned. We have not sold a lot. We had to sell a bit in May because we had a bit of redemption. But we are now in the camp of buying stocks that we liked anyway.
Stocks, which are in the right sectors and stocks where the valuation has come down within the correction, we are on the buy side currently.
Could you give us some numbers, those redemptions were to the tune of what, less than 10% or more than 10% of your corpus, and has that abated in June?
Much less than 10%. We had very slight redemptions within our India fund and within our global emerging market funds. The redemptions we have seen, one could really ignore that.
Whatever you had, they have slowed down in June as well?
The big change is in the first four months of the year; we had big inflows into the fund. This has probably also driven the Indian market because it was not only us; others also had big inflows.
The big change is not that we have suddenly seen redemptions; the big change is that the inflows have stopped. So we do not have any fresh money to invest. If we want to invest additionally into India, we have to sell in another market, or we have to switch Indian shares from one share into the other. This is the most significant change.
Anecdotally, is that what is happening for other BRIC funds as well, in Europe, where not so much redemption, but inflow has probably waned off for this month?
This is what I would assume. I think other fund management companies running BRIC funds have a similar situation that the inflows into their funds have stopped.
How much cash would you be sitting on at this point, and is there anything that you used the dip to buy into?
We are sitting on a very small amount of cash. Nevertheless, I have a bit of cash left to invest into your market. I am also thinking that even the global equity funds within our firm are now re-looking at India because the Indian market is the most attractive, in terms of the economic outlook around the world.
India is having problems that other countries would like to have; the economy is growing probably too fast.
As we have seen with your interest rates on Friday, the problem is more about overheating, than a slowdown. So I think global investors are still positive on the Indian market, especially after the correction. Investors too feel more comfortable at a P/E level on the market of 14-15 and they have been at a P/E level of around 20.
Did you buy anything in India in June? Could you give us some indication of what you did buy, if you bought?
We have added positions in the sectors we like. This is mainly in infrastructure, cement, steel and construction companies. We also added a bit in the consumption area.
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