What is your outlook on the kind of recent action that we have seen from central banks across the globe and how you are looking at the overall interest rate and inflationary environment? Are things now settling?
They are certainly moving in the right direction, but I think that market hopes that the ECB and the Fed will act on the trend rather than the hard numbers which is a little premature. So, I am certainly expecting both the Fed and the ECB to hike again in early May. After that, I have much less conviction either way.
What about investor sentiment because it clearly seems like risk appetite is coming back and I am not just talking about equities, look what is happening for Bitcoin, for instance, it is actually the best performing asset class year to date. But that aside be it CAC, the FTSE, even the kind of rebound that you have seen in some of the key US indexes or back here in India the kind of recovery that we have seen from those March 29 lows has been phenomenal. What are you reading into how funds are going to move to the developed markets as well as emerging markets, and how investor sentiment is likely to pan out?
Well, certainly what we have been hearing and seeing is that the sense of opportunity is directed towards emerging markets at the moment. A big part of that optimism is predicated on China’s post-COVID lockdown rebound. But flows into dedicated India funds have been on the rise. This week was the biggest in close to eight months and we are seeing some interesting flows into fund groups dedicated to the riskier corners of the emerging markets universe. Frontiers markets, bond funds have had some exceptionally large flows over the past few days. There is definite signs of risk appetite throughout the fund groups that we track.
What about India in specifically? Is that regaining FII favour because we are clearly seeing fund flow better than what we saw in the month of March or January or February, for that matter. But it seems that preferences towards markets like Taiwan, Brazil or for that matter even China still persist.
Again, I am tempted not to answer since the way you have put the question about covers it. That said, there is an uptick in flows to India funds and momentum seems to be building. But there is also definitely, from the research I read, a feeling that there needs to be another catalyst for the next leg up and a certain degree of caution given the outlook for energy prices in terms of getting too big, too far ahead of themselves when it comes to India, which is very oil dependent in terms of having to import large quantities of what it uses.
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