India looks strong in the emerging market space
Christopher Knight, ED, Head, India Equity, JP Morgan in conversation with ET said that India is definitely better off than, say, a Taiwan or a Korea in the emerging market space.
By ET Bureau |
| Christopher Knight, ED, Head, India Equity, JP Morgan |
He is of the view that India is definitely better off than, say, a Taiwan or a Korea in the emerging market space. Meet Christopher Knight, ED, head-India Equity at JP Morgan. In a free-wheeling interview with Deeptha Rajkumar, Mr Knight spoke about the premium that corporate governance commands in India today, JP Morgan���s upgrading of India to ���neutral��� and as to how the Satyam issue is company-specific and not a systemic one.
After the Satyam debacle, what is your view on corporate governance practices in India?
I think it���s unfair to label India on this one incident. These things happen pretty much anywhere in the world. The key lies in how such issues are handled.
To me, it is more of a Satyam issue than a systemic one. India has actually handled it quite well. Taking a step further, longer term, these events tend to define markets. So, we will see corporate governance in the limelight, probably tighter controls on accountancy and also foreign lawyers coming to India.
Has this incident impacted the outlook of overseas investors towards India Inc?
Yes, to a certain degree. Everyone has become a bit sceptical about certain companies where there are high cash balances. So, I guess investors are doing their homework to see if they are for real. What we are seeing is that international investors are staying away from second-liners. But in terms of overall flows into India, I think we have actually seen some positive flows.
Given the current environment, what are you advising your clients?
Now, it is probably at a 10% premium to emerging markets. If you look at it from an international investor���s perspective, India is actually back on the radar. Before that we saw a lot of hot money come in. Now, we are seeing more of value investors. On the back of that, there are inflows into India, but again it���s very specific to quality large-caps.
At the moment, where does India stand say vis-��-vis China?
The overriding consensus is that most investors are overweight on China. I am beginning to think people are actually getting uncomfortable with that and looking at India. They are not necessarily pulling the trigger yet.
Interestingly, our strategist Adrian Mowat had actually upgraded India to ���neutral��� the day after Satyam. We think the growth story in India remains and is still domestic driven to a certain degree. If you look at the Taiwanese market, 50% of their index is in tech. So they are driven by what���s going on in Europe and the US. In comparison, India appears to be on a stronger footing in the emerging market space.
What is the outlook in the near term?
We do have the elections coming up. It���s an unwritten rule that we will have volatility in the run-up to the elections. It is just not India, lot of events worldwide will dictate flows. Many people are right now sitting on the sidelines.
We will see volatility on low volumes. Once things settle down, people will take a fresh look. In the near term, I don���t see the market going down more than 10%.
After the Satyam debacle, what is your view on corporate governance practices in India?
I think it���s unfair to label India on this one incident. These things happen pretty much anywhere in the world. The key lies in how such issues are handled.
To me, it is more of a Satyam issue than a systemic one. India has actually handled it quite well. Taking a step further, longer term, these events tend to define markets. So, we will see corporate governance in the limelight, probably tighter controls on accountancy and also foreign lawyers coming to India.
Has this incident impacted the outlook of overseas investors towards India Inc?
Yes, to a certain degree. Everyone has become a bit sceptical about certain companies where there are high cash balances. So, I guess investors are doing their homework to see if they are for real. What we are seeing is that international investors are staying away from second-liners. But in terms of overall flows into India, I think we have actually seen some positive flows.
Given the current environment, what are you advising your clients?
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We are telling people to stick to large-cap companies. There are some very good names out there. When I arrived here more than a year and half ago, India was peaking and it was at an 80% premium to emerging markets. Now, it is probably at a 10% premium to emerging markets. If you look at it from an international investor���s perspective, India is actually back on the radar. Before that we saw a lot of hot money come in. Now, we are seeing more of value investors. On the back of that, there are inflows into India, but again it���s very specific to quality large-caps.
At the moment, where does India stand say vis-��-vis China?
The overriding consensus is that most investors are overweight on China. I am beginning to think people are actually getting uncomfortable with that and looking at India. They are not necessarily pulling the trigger yet.
Interestingly, our strategist Adrian Mowat had actually upgraded India to ���neutral��� the day after Satyam. We think the growth story in India remains and is still domestic driven to a certain degree. If you look at the Taiwanese market, 50% of their index is in tech. So they are driven by what���s going on in Europe and the US. In comparison, India appears to be on a stronger footing in the emerging market space.
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What is the outlook in the near term?
We do have the elections coming up. It���s an unwritten rule that we will have volatility in the run-up to the elections. It is just not India, lot of events worldwide will dictate flows. Many people are right now sitting on the sidelines.
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Going forward into the Indian earnings season, we are likely to see more volatility. Some companies, which have reported their earnings, have seen extreme moves. So, things are not priced in quite as everyone thought it had been. We will see volatility on low volumes. Once things settle down, people will take a fresh look. In the near term, I don���t see the market going down more than 10%.
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