Punita Kumar-Sinha, senior managing director at Blackstone Asia Advisors, is a person of many parts. An IIT graduate and a holder of a doctorate in finance from Wharton School, University of Pennsylvania, Punita has managed funds investing in Indian equities.She has worked earlier with Oppenheimer Asset Management as a senior fund manager and her views on stock markets are sought by investors from all quarters. She told in an exclusive interview that risk aversion is decreasing and investors are redeploying some of their money into equities.
There is a thought expressed in the market that this is just a long bear market rally. Is that true?
Definitely. It is not a bull market rally because bull markets have some very strong fundamentals backing them and this one doesn’t have the strong fundamentals. But this is a rally obviously that has happened after a very strong correction in the markets.
So you could call it a bear market rally, but in India, in particular, if the Budget is good and the economy continues to grow, the fundamentals might start supporting this rally and at that point you wouldn’t really call it a bear market rally anymore.
Definitely. It is not a bull market rally because bull markets have some very strong fundamentals backing them and this one doesn’t have the strong fundamentals. But this is a rally obviously that has happened after a very strong correction in the markets.
So you could call it a bear market rally, but in India, in particular, if the Budget is good and the economy continues to grow, the fundamentals might start supporting this rally and at that point you wouldn’t really call it a bear market rally anymore.
What to your mind is driving liquidity? Do you think it is the fact that central banks are shifting money? Is that the real reason that liquidity is coming back?
Risk aversion was very high last year. After the crisis, people pulled money out of equities and went into treasuries and put it in money-market funds and these funds saw unprecedented amounts of inflows and even the mutual funds are sitting on cash. So a large part of it is just redeploying some of the cash that was in the equity funds as well as people taking some money out of money-market funds.
As risk aversion has come off, some people have pulled out a little bit of money out of treasuries and gone into commodities as well. So I think it is not that necessarily huge amount of new allocations have happened or new mandates have really caused money to be allocated to equities. I think it’s mostly money that was already there and that was taken out has come back in.
In terms of an allocation, have you changed anything regarding the weightage of the overall portfolio towards India? Have you reduced it or increased it?
We have increased our allocations to India. We were underweight versus China and now we have shifted some money back into India and at the moment, I think India and China are both probably slightly overweighed.
Let's understand your expectations from the Budget. What do you think is the importance of the Budget this time for the Indian market?
I think this time around the Budget is actually more important than its ever been because right now, the market has rallied very sharply in India based on the outcome of the general elections and a strong or stable government. So now, everyone is waiting to see what this government is able to deliver given that it is no longer much of a coalition government, but you know, it’s a stabler government than its ever been.
That’s why the Budget is important because it’s going to outline what this government is able to do and it is very important that the government takes some very strong measures to reassure both investors, domestic as well as foreign, that India can actually realise the promise that it holds.
I think this time around the Budget is actually more important than its ever been because right now, the market has rallied very sharply in India based on the outcome of the general elections and a strong or stable government. So now, everyone is waiting to see what this government is able to deliver given that it is no longer much of a coalition government, but you know, it’s a stabler government than its ever been.
That’s why the Budget is important because it’s going to outline what this government is able to do and it is very important that the government takes some very strong measures to reassure both investors, domestic as well as foreign, that India can actually realise the promise that it holds.
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