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'Good that the market is off peak'
May 22, 2006
Peter Douglas of GFIA Singapore expected a substantial correction in India. Douglas says that he is heartened that the Indian markets are off its peak and foreign funds are moving more gradually into India. According to him, Indian markets were giving frothy overheated signals.
Excerpts from CNBC - TV18's exclusive interview with Peter Douglas:
How do you read the correction that has come to India?
I think the market has been expecting a substantial correction. Basically the Indian market was getting very frothy and over heated.
We felt that one of the big decisions that any Asian managers would make this year would be, when to call the top of the Indian market. It is a very difficult call obviously, once the latter stages of a frothy market peak away, one can make most money. So we have the greatest risk.
A lot of activity seems to be driven by leveraged domestic investors, being spooked by global markets and unwinding their leverage positions. If that analysis is correct then what has been going on is very healthy, because by definition it will be taking some of the froth out of the market. So we would rather feel heartened that the market has come away from its peaks.
When do you start re-entering the market? When and what levels seem more attractive for this market?
That is the question, which is going to be difficult for fund managers, particularly for the risk management protocols that we have.
A very few managers that we look at, will pay a great deal of attention to market indices. India is all about stocks; single names and managers could be looking at specific valuations of specific issues that they are interested in.
Generally speaking they will move fairly gradually rather than looking at one specific trigger point.
How much do you think hedge funds have pulled out and what percentage of cash they might be sitting on?
I wouldn't have that number and I would be surprised if anybody does. It is likely to be a fairly marginal figure compared to domestic investors. A lot of our managers are surprised to see how much of this shake out is domestically driven.
I think the world has expected that it would be global liquidity coming out of India, which would trigger the sell off. In fact, it was domestically driven and that is where you want to look.
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