Business Standard: What according to you is the reason for the current state of Indian stock markets? What should be done to revive the markets?
UR Bhatt: Stock markets are truly reflecting the state of the countrys economy. The trend in the stock markets can be attributed to three factors -- the lack of demand in the economy, which has failed to pick up despite all attempts, the volatility in the forex markets, and political uncertainty.
Every fund managers have a basic objective of maximising returns, and he will make all efforts towards this end. Thus, in the given scenario, most of the open-ended funds will look towards safer investment options. We have already seen some out flows, some more may just follow in the days to come.
BS: What will be the trend of foreign fund flow into the country this coming quarter? How do you see the fund managers rating India among the emerging markets?
URB: Funds investing abroad can be classified into three types -- emerging markets, country-specific and international market funds. For obvious reason the funds for international markets will not be diverted towards the Asian market. The hopes can now be pinned on country-specific and emerging funds. The emerging market fund is likely to shrink this time around because of the south-east Asian currency turmoil and the higher risk which these markets offer.
Thus, even if India is allocated a greater chunk by the fund managers, the investment in actual terms may not be more than the previous years. The country-specific fund is expected to be better for India, since it is perceived as a safer market. But again, looking at the fundamentals there is not much of hope.
BS: What according to you is the reason for the current slump in the economy and what can been done to revive the economy?
URB: With the public sector spending for infrastructure projects dipping, the government should make suitable legislative changes in order to attract both private and the foreign investment in this segment. Once this is done, we will see demand in various quarters picking up, which will have a multiple effect on the economy.
Secondly, we have to keep in mind that we are going through a lean patch at the moment. This is because every business cycle goes through a slack period and the best that needs to be done is keep floating.
India has grown at a reasonable rate since 1992 and every country finds it difficult to keep pace with the growth. We are optimistic about the future of the countrys economy.
