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India has received disproportionate amount of attention from global investors: Markus Rosgen, Citi

Investors clearly have faith in the ability of the Modi administration to continue with the reform process

, ET Bureau|
Updated: Jun 02, 2017, 08.58 AM IST
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 Most global EM investors are overweight India. Valuation wise, India within EMs is at the more expensive extreme.
Most global EM investors are overweight India. Valuation wise, India within EMs is at the more expensive extreme.
India may not see disproportionate amount of flows coming its way in the times to come even as the outlook re mains positive, said Markus Rosgen, MD, Global Emerging Markets Equity Strategy at Citi. In an interview with Sanam Mirchandani on the sidelines of Citi India Investor Conference, Rosgen said investors abroad are now watching out for the results of the reform process that the government has undertaken.

Edited Excerpts:


Emerging markets have done well this year but is the upbeat mood likely to sustain?

Equity asset class of EM has generally done well and it has beat developed market returns. A lot of global investors are not overweight the EM asset class. It also tells you a great deal about the potential for this asset class to continue to do better. If the leading indicators are right around the world -which are still showing things are getting better they are not getting worse -then we have a sweet spot for the asset class because the Fed maybe tightening another two times this year. Another 50 bps is not a catastrophe as far as the world economy is concerned.

India is an overweight for most global fund managers. How do you see the trend panning out going forward?

Most global EM investors are overweight India. Valuation wise, India within EMs is at the more expensive extreme. If you look at the fund flows that have come from overseas, it has been a disproportionate recipient of investors' attention as it has been more defensive. As I look forward from here, the disproportionate amount of money that has been allocated to India relative to its size in Asian indices or EM indices, it just can't carry on but it is not because people are getting more bearish on India. Within India investors may switch portfolio around a little bit but from a global perspective, they might say -why not put some money to work in Korea, China or Taiwan where people have a big underweight.

Many countries have become more inward looking in terms of policies. Is that a new normal now?

I don't think we are on a new trend where everyone is going to become more protectionists. What all of these elections have done for the greater political environment is politicians understand they need to have policies that bring growth back because the easiest way to solve these problems is growth.

How would you rate Modi government's three years in power and what is your expectation from the remainder of his term?

Investors clearly have faith in the Modi administration and the ability of the Modi administration to continue with the reform process. What people are looking for now is the fruits of that reform and if the fruits come through, more capital will be coming in. If the fruits disappoint, people may seek a reallocation. There is a lot of fanfare in terms of reforms. Some of those reforms have been undertaken. A lot of the investors want to see the proof of the pudding now.

Will GST be a big disrupting factor for the economy?

I don't think it will be more difficult or less difficult to implement GST in India. A lot places in the world have one GST system. In that regard, India is a late comer. Simplification is always good; it should have a good impact on pricing of these products. The arbitrage should make things more efficient which ought to be good for the consumer.

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